Sunday, August 02, 2009

Quote about Corus: "No franchise value to the bank at all"

by Calculated Risk on 8/02/2009 10:49:00 AM

From Becky Yerak at the Chicago Tribune: Corus Bankshares Inc. on cusp of crisis (ht Walt)

[A] major hurdle for the [FDIC] is that $7.07 billion-asset Corus, with only 14 offices in the Chicago area, has operated more like a real estate investment company than a traditional bank.

As a result, bankers like John Kanas, chief executive of BankUnited, believe the FDIC would have a tough time finding banks eager to swallow Corus whole.

"There's no franchise value to the bank at all," he said, citing its limited branch network, a reliance on high-cost deposits and an unsustainable business model.

"It was a bank created around the asset side of the balance sheet: 'Let's go make a lot of loans and figure out a way to fund them later,' instead of a bank that had a valuable franchise of deposit collection and was looking for a place to put those deposits," Kanas said.
The article discusses why it is has been difficult to find a buyer for Corus. There is tremendous uncertainty on the asset side (see this article today in the Las Vegas Sun on the Streamline Tower), and the new proposed rules for private-equity firms has made bidding for assets of failed banks less attractive.

This is why the FDIC is discussing splitting failed banks into two pieces, and then selling the deposits and branches to another bank, and many of the assets to PE firms (or create a new RTC).

There is much more in the article ...