U.S. Banks Weakened in First Quarter

The financial strength of the nation's banks deteriorated in the first quarter amid declining credit quality and low capital levels.

Among 8,260 banks and savings-and-loan institutions, 26% received "weak" financial-strength grades of D-plus or lower from TheStreet.com Ratings, based on first-quarter data. That amounts to 2,125 companies, up from 1,835 in the previous quarter and 1,717 a year earlier.

The banking industry's combined profit dropped to $7.6 billion in the first quarter from $19.3 billion a year earlier as companies like Bank of America ( BAC) and Citigroup ( C) struggled to regain their footing. While it was an improvement from the industry's $32 billion net loss in the fourth quarter, banks and thrifts continued to wrestle with nonperforming loans and rising charge-off rates. Twenty-one banks failed during the first quarter, the most in any quarter since 1992.

TheStreet.com Ratings assigned "good" ratings of B-plus or above to 1,175 of the reporting institutions, or 14%. That's a decrease from 1,388 in the previous quarter and 1,561 a year earlier. We rated 32 banks or thrifts A-plus, or "excellent, down from 37 in the previous quarter.

Problem institutions and failures

The Federal Deposit Insurance Corp.'s list of "problem institutions" increased to 305 in the first quarter from 252 at the end of 2008, according to its Quarterly Banking Profile.

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