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Commercial banks

North Carolina Banks Face Uncertain Future Amid Global Economic Woes

Strategic Insights

— 2 min read

As the global economy grapples with the crisis in Russia and Asia, banks in North Carolina are bearing the brunt of the plunge in financial stocks. The market value of NationsBank Corp. has dropped significantly, with its stock closing at $56.56, down 36 percent from its peak on July 14. Analysts are concerned that the bank's merger with BankAmerica Corp. will expose it to greater losses, particularly in Russia. Despite the uncertainty, experts believe that the stocks will eventually rebound, but the question remains whether the North Carolina economy will be able to withstand the global economic downturn.

Key Takeaways:

  • NationsBank Corp. has seen its market value drop from $84.6 billion to $54 billion, with its stock price plummeting 36 percent from its peak on July 14.
  • The bank's merger with BankAmerica Corp. could expose it to significant losses, particularly in Russia, where BankAmerica has estimated trading losses of $220 million.
  • Other major banks in North Carolina have also seen their stock prices fall, with First Union Corp. down 21.3 percent, BB&T Corp. down 16 percent, and Wachovia Corp. down 10.5 percent from their 1998 peaks.
  • Analysts believe that the plunge in stocks may be an over-reaction, as these North Carolina banks generally do little business in Russia or other problem countries.
  • Bank stocks historically drop fastest before a recession, and if a recession is predicted, it's likely that bank stocks haven't hit bottom yet.
  • The costs of fixing the Year 2000 computer bug and the difficulties in using bank stock to buy other banks may lead to a drastic decline in buyouts and mergers by early next year.

Statistics:

  • NationsBank Corp.'s market value has dropped from $84.6 billion to $54 billion.
  • BankAmerica Corp.'s estimated trading losses in Russia are $220 million.
  • First Union Corp.'s stock price has fallen 21.3 percent from its 1998 peak.
  • BB&T Corp.'s stock price has dropped 16 percent from its 1998 peak.
  • Wachovia Corp.'s stock price has fallen 10.5 percent from its 1998 peak.
  • The Dow Jones Industrial Average jumped 380 points yesterday to 8,020.
  • The Federal Reserve may lower interest rates, which could positively impact the US economy.

Sources:

  • North Carolina bankers face uncertain future amid global economic woes, The Charlotte Observer, [No date mentioned].
  • Plath, Tony. (Director of Banking Studies, University of North Carolina at Charlotte).
  • Schroeder, Harold. (Analyst, Keefe, Bruyette & Woods Inc. in New York).
  • Davis, Harry. (Professor of Finance, Appalachian State University).

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