March 16, 2009 / 2:46 PM / 9 years ago

Banks' ROEs to decline due to higher FDIC rates: Friedman

March 16 (Reuters) - Banks’ return on equity levels will be pressured in 2009 due to an increase in the fees the U.S. Federal Deposit Insurance Corp charges banks to replenish the government’s deposit-insurance fund, Friedman Billings Ramsey said.

“We believe stocks that have both a premium valuation and are likely to experience the most pressure to return on equity (ROE) will be the ones to experience the largest hit to valuation as a result of rising FDIC rates,” analyst James Abbott said.

    PNC Financial Services Group Inc (PNC.N), Wells Fargo & Co (WFC.N), U.S. Bancorp (USB.N), Bank of America Corp (BAC.N) and M&T Bank Corp (MTB.N) appear to be at the most risk, Abbott said.

    On Feb. 27, the FDIC approved a package of measures aimed at raising as much as $27 billion this year in assessment revenues, including $15 billion from a one-time fee of 20 basis points (bps) in the third quarter. [nN27340481]

    “Depending on whether industry pressures lead to a decrease in the special assessment to 10 bps, we expect consensus 2009 ROE will decline between 60 bps and 150 bps from current levels, further restraining and/or pressuring stock valuations in 2009,” Abbott said. (Reporting by Archana Shankar in Bangalore; Editing by Anne Pallivathuckal)

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