Despite subprime woes, Minnesota banks in good shape

St. Paul, Minn. These aren’t the best of times for banks. The mortgage business has really cooled off. And people seem to be cutting back on other forms of borrowing, as the economy slows down. Meanwhile, rising interest rates mean banks have been having to pay depositors more for their money. But these are far from the worst of times for banks. They’ll certainly survive, says Virginia-based banking industry consultant Bert Ely. It’s not going to cause anybody to fail.

The Wayzata-based bank has increased reserves for possible losses on housing and commercial loans. But Crabtree says anybody in the business of making home loans is facing tougher times. The demand for housing is retreating to more normalized levels, says Crabtree. And that means TCF, like anyone else extending credit in the housing area, is going to see less turnover, less appreciation, less willingness of borrowers to go out and borrow money against their homes.

Wells Fargo has boasted it’s the No. 2 mortgage originator in the nation. The bank has some subprime mortgages in its portfolio. But it has taken steps to reduce potential losses on those loans. It’s harder now for borrowers with weak credit to qualify for loans. And the bank shut a unit that buys subprime mortgages from other lenders. I view Wells Fargo as consistently one of the top performers in the banking industry, because of consistency of results and diversity of revenues, he says.

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