Consumer confidence in the nation's financial structure has risen alongside bank profits and capital to its highest level in at least a decade.
For the first time in the 11 years of the American Banker's surveys of consumer attitudes toward the financial system, more than three-fourths rated it healthy.
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The 1994 survey of 1,024 households was conducted by the Gallup Organization between Sept. 28 and Oct. 13. During the first half of the year, commercial banks earned record profits of $22.3 billion, and their 8.1% equity capital ratio was the highest in three decades.
While the percentage of consumers calling the U.S. banking system healthy jumped by 13 points, to 77%, those within that group calling it "very healthy" totaled 14%, more than double 1993's 6%. The latter number had not been in double figures since it was 12% in 1988, before the thrift crisis had completely hit the public consciousness.
Joe Belew, president of the Consumer Bankers Association in Arlington, Va., said the outpouring of confidence is the result of "a general sense that there is no major crisis in banking right now."
Michael J. Griffin, chairman of Summit Bank in Chatham, N.J., said consumers are "reassured by the banks' earnings."
Mr. Griffin, who is an American Bankers Association banking adviser, said, "It is very positive that people are reacting to the dramatic change that has taken place in banking since the December Surprise" and the savings and loan crisis.
Mr. Belew said bankers -- like Detroit's carmakers -- have neared the end of a rebuilding process that has restored the fundamentals of their business. Now, banking "is a very solid business," Mr. Belew said. "Throughout American industry, there is a real competitive edge emerging because people have cut the fat out."
The assessments of industry health were up across all market segments, but commercial bank and credit union customers were a bit more sanguine than those who identified themselves primarily as thrift customers.
Eighty-two percent of the bank customers rated the financial system "very" or "fairly" healthy, up significantly from 63% in 1993 and 51% in 1992. Among credit union members, 73% gave the industry healthy grades, up from 62% in 1993 and 53% in 1992.
Of thrift customers, 72% viewed the overall industry as healthy or fairly healthy, up from 67% in 1993 and 50% in 1992.
Steven J. Trafton, chairman and chief executive officer of Glendale Federal Bank, said, "These consumer confidence numbers really confirm our view that the thrift crisis is over, and that in the consumers' minds thrifts continue to play an important role in the retail finance industry."
Glendale's recent experience provides an example of how customers can regain confidence as their institution's health improves.
"Our institution, having at one point been one of the larger troubled thrifts in the country, had to struggle to maintain our customer base," Mr. Trafton said. "Since our recapitalization and the demonstration of profitability, both our sales and net new customer growth have been accelerating each month."
Cecil R. "Andy" McCullar, president and chief executive officer of Charter Federal Savings Bank, Bristol, Va., had a similar experience.
The $740 million-asset thrift is "heading into its second year since we resurrected ourself with a rights offering," Mr. McCullar said.
Before the recapitalization, "there weren't any people in our lobby and there weren't any cars in the drive-up line," Mr. McCullar said. Now, "when you amble through the lobby you see people opening new accounts."
Bank profits and capital levels started their sharp ascent in 1991. A year later, consumers reflected those changes with rising levels of confidence, as measured in the American Banker's annual survey.
The survey has generally tracked the widely followed Conference Board index on the general economy. At points in the year when the newspaper's survey was taken, that confidence index declined steadily from 1988 through 1993, then did a sharp upturn this year.
"Healthy" and "very healthy" ratings in the American Banker's surveys declined from 73% in 1988 to 51% in 1991 and 1992, then made two strong upward surges, to 64% and 77%.
The American Banker/Gallup survey also gets at banking confidence through a differently worded question: "How much confidence do you personally have in the safety and security of the U.S. banking and financial system?"
The percentage saying "little or none" fell from 18% in 1993 to 13%, its lowest level since 1987. Those with a great deal of confidence jumped 10 points to 28%, the highest since the 33% of 1989.
The sum of those with a "great deal" or "some" confidence was up four points this year, to 86%, and is well above the 74% record low of only two years ago.
This year's survey also showed that consumers are generally unfamiliar with, or apathetic toward, laws that bankers have viewed as crucial to their business.
While bankers wring their hands about the Community Reinvestment Act, the public is not paying attention. As in the last two years, roughly a quarter favor the law, a tenth oppose it, and 62% have no opinion.
Similarly, half of consumers have no opinion on interstate banking. But the concept is favored by a margin of 36% to 14%, up from 29% to 17% last year, before Congress passed the interstate banking law.
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