Martin Weiss, chairman of Weiss Ratings, says banks such as Bank of America, Citibank, Wachovia, HSBC Bank USA and RBC Citizens are vulnerable to financial problems 20 months after the $700 billion federal bailout.
Weiss Ratings’ system takes into account a bank’s profitability, capitalization, reserves, liquidity, stability and investment safety. As per this system, Citibank and E*Trade Bank rank as D minuses, and Bank of America and Wells Fargo are slightly better at D. JPMorgan Chase got a C and Goldman Sachs was rated B plus.
"Smaller banks typically have a lower rating than big banks based on their size," Weiss says, "but in this case, the capital was overwhelmingly stronger in the smaller banks; they overcame the size disadvantage." Some of the banks that top Weiss’ strongest banks list include Bank of Delight in Delight, Arkansas; West Central Georgia Bank in Thomaston, Georgia; and Bank of Grandin in Grandin, Missouri, among others.
So why according to these ratings do many smaller banks appear stronger than the larger ones? "Most of the large banks have high exposure to the credit risk from derivatives," Weiss says. It’s for this reason and the banks’ earnings volatility that he thinks we’re in a bigger banking crisis than most people realize.
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