Despite the losses, a combination of a reduction in the bank's loan portfolio and some capital from the holding company increased the bank's tier 1 leverage ratio to 8.94% and its total risk-based capital ratio to 13.13% as of Dec. 31, up considerably from 5.96% and 10.55% a year earlier. Those ratios need to be at least 5% and 10% for most banks to be considered well-capitalized. RBC Bank (USA) didn't participate in TARP.
Like Compass Bank, RBC Bank (USA) is relying on its holding company as a source of strength through the crisis. In a report supporting his firm's "neutral" rating for Royal Bank of Canada, Bank of America Merrill Lynch analyst Steve Theriault said significant declines in fourth-quarter trading revenue for JPMorgan Chase (JPM) and Citigroup (C) indicated a similar decline would be reported by Canada's largest bank for its fiscal first quarter, which ends Feb. 28.
The shares closed at $54.42 on Thursday, up 3% this year. Theriault's one-year target for the shares is $56.
East West BankEast West Bank of Pasadena, Calif., is held by East West Bancorp (EWBC). In addition to its branches in southern California, the company operates several offices in China. The bank's nonperforming-asset ratio was a relatively low 1.16% as of Dec. 31. However, its ratio of net charge-offs (actual loan losses) to average loans was a high 5.16% for 2009. Fourth-quarter earnings were boosted by a pre-tax gain from the acquisition of the failed United Commercial Bank of San Francisco, illustrating how lucrative it can be to take over a failed bank with a loss-sharing guarantee from the FDIC.
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