Maryland banks and thrifts could emerge from the current economic downturn stronger than ever, but they will have to make some changes in the way they do business, according to banking experts.
"If past experience holds, the recession will play itself out in 18 to 24 months," said Thomas F. Keaveney, national practice director, commercial banks, for KPMG Peat Marwick in New York.
"Banks and thrifts should be taking action now . . . based on what they need to do to participate in the recovery," he said at a seminar held yesterday at the BWI Airport Marriott. About 100 representatives of financial institutions attended the seminar sponsored by KPMG Peat Marwick.
Keaveney said he believes that in the future the market or federal regulators will force institutions to maintain higher loan-loss reserves than they have in the past in order to protect themselves against bad loans. He said he also believes the institutions will have to become better financial planners.
"Banks and thrifts will have to be more realistic in managing their resources," Keaveney said. "They will have to be willing to sacrifice the current month's earnings for future growth."
The economic picture for banks and thrifts is gloomy. Currently three thrifts in Maryland -- Vermont Savings Association, Liberty Savings Bank and First Fidelity Savings Bank Annapolis -- are under the supervision of the Resolution Trust Corp., the government agency created to help solve the nation's savings and loan crisis.
A number of banks are also experiencing troubles.
For example, MNC Financial Inc., the parent company of the state's largest bank, recently announced plans to sell its credit-card business in order to raise its loan-loss reserves to cover anticipated bad loans.
Some factors that have hurt banks and thrifts, such as the softening real estate market and stiffer federal regulations, were beyond the control of the financial institutions.
Angus T. Shearer, with KPMG Peat Marwick in Boston, said federal regulators have found that a number of banks kept poor records of their loans and had vague loan policies.