Ahead of the Bell: FDIC fee hike may affect banks

Higher assessments fees from the Federal Deposit Insurance Corp. could pressure earnings and expenses at banks like Synovus Financial Corp., Hudson City Bancorp Inc. and Astoria Financial Corp., an analyst said Tuesday.

Friedman, Billings, Ramsey & Co. analyst James Abbott said increased FDIC assessment fees could increase expenses for banks in 2009, eating into potential profit.

A recent surge in bank failures amid the ongoing credit crisis has led to the FDIC's insurance fund dropping below its minimum allowable reserve ratio of 1.15 percent. The FDIC must replenish the fund within five years, and is likely to increase rates beginning in 2009, Abbott wrote in a research note.

Many regional and community banks used credits to offset fees in 2008, so without credits and with rising fees, the increased costs could be especially high for some banks, Abbott said.

Abbott estimates the FDIC will increase fees to generate $60 billion between 2009 and 2013 to more than offset a total of $40 billion in losses to the fund through 2013.

Looking at proposed assessment changes, Abbott said banks with good liquidity and low operating expenses will see the most meaningful impact to earnings per share since the fees could sharply increase costs.

Synovus's earnings per share and Hudson City Bancorp's and Astoria Financial's expenses could face pressure based on a study of the banks' deposit bases and assessment fees, Abbott said. Other banks that could face pressure include The Bancorp Bank, Frontier Financial Corp., Guaranty Bancorp and Washington Federal Inc., he said.