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US regional banks: BP’s woes spill over into US banks

Region’s bank stock drops 13%; Community banks worst hit say analysts

As the BP oil spill in the Gulf of Mexico spreads its way to the shorelines of the Panhandle, the impact on the banks in the region is coming under increasing scrutiny. As the oil industry, local tourism, and fishing businesses suffer losses, repayments on consumer and business loans and mortgages are expected to be delayed, putting pressure on the local banks that serve the states along the shore of the Gulf of Mexico.

Larger banks are offering customers a break on their repayments. Citi announced in the middle of June that borrowers in the 25 miles of affected coastal areas with first mortgage loans owned by CitiMortgage would not be subject to foreclosure sales or foreclosure notifications until the middle of September, and that evictions on real estate-owned properties will cease during this time.

Smaller banks that are already struggling to stay afloat since the financial crisis, however, cannot afford to forgo payments. Some market participants expect as many as 100 Florida banks to fail this year, although most of those will be small community banks that have been teetering on the edge since the financial crisis.

Before the oil spill, the future of Florida’s banks had looked more promising.

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