IRA has released its Banking Industry Stress Ratings for all US banks as of Q4 2008 for users of the professional and consumer versions of The IRA Bank Monitor.   In Q4 2008, average industry stress rose 15% to 1.77 vs. Q3 2008. The Stress Index is now 77% above the benchmark for all US depository institutions (1=1995).

To read the IRA press release containing our overview of the Q4 results and the Stress Index ratings for Citgroup (NYSE:C), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) and JPMorgan (NYSE:JPM), please click here. 

Being rated “D” or “F” does not mean that the institution will fail, but it does mean that the bank’ current performance in Q4 2008 was far above the industry’s elevated stress levels and thus the bank get’s a poor grade for this period.  Indeed, in many cases institutions with relatively high levels of stress could be excellent value for investors.  Users of the consumer and professional version of The IRA Bank Monitor can view ratings and profiles for all US depository institutions.   

In addition, IRA has announced a new feature for users of the IRA Bank Monitor and Bank Cart.  Starting in Q1 2009, when a new CALL/TFR report is posted on the FDIC web site, we will grab the data in real time, calculate the preliminary Stress Index rating for the bank unit, and send an alert to users of the IRA Bank Monitor who have selected that institutions in their alert portfolio. This will improve the timeliness of the IRA Bank Monitor by several weeks. 

Click here to get more information about The IRA Bank Monitor or to look up the profile for your bank.

Questions? Comments? info@institutionalriskanalytics.com

Questions? Comments? info@institutionalriskanalytics.com

Institutional Risk Analytics has added explicit letter rating grades for safety and soundness calculated for all US banks and bank holding companies. The A-F grades are displayed in both the individual IRA Bank Cart Reports as well as in all of the profiles in the IRA Bank Monitor professional analytics tool.

Ratings are available for both individual bank units and bank holding companies, which are shown in a "bank only" roll-up format to enable apples-so-apples comparisons of large and small bank and thrift institutions. These fundamentals-based ratings are focused not on projections of future earnings or equity market volatility, but instead on the safety and soundness of the depository. The five ratings categories are shown below:

IRA's Letter Grade Rating System for all US Banks 

A+ -- Overall Bank Stress less than 1995 1.0 index baseline. Banks with this grade tend to exhibit stong metrics across the board.

A -- Stress slightly less than the industry average. Bank business practices are much more varied than people realize. Institutions in this category exhibit business model choices that allow them to operate with improved cushion against current systemic threats.

B -- Stress slightly above the industry average. These banks begin to show sensitivity to systemic stresses but still have a business model that offers a some degree of flexibility to resist crisis forces.

C -- Stress levels moderately above industry average. In these banks, one or more key metric areas begin to show degradation(s) indicating a need for active attention by officers and directors.

D -- Stress indicators well above the industry average. These institutions tend to show significant degradation in one or more of the key areas of measurement. Concern has likely begun to garner the attention of parties outside the bank.

F -- Stress levels at the extreme range above industry average. At this degree of stress, one or more of the key elements of the business model has reached failure mode. What concerns exist are probably already public.

The factors included in the ratings are based on IRA's Bank Stress Index, which include:

* Profitability
* Lending Default Experience
* Capital Adequacy
* Loan and Unused Commitment Exposure
* Operational Efficiency