The tidal wave of bank profits has lifted the public's confidence in banks to yet another new high.

American Banker's 1995 survey of consumer attitudes, conducted by the Gallup Organization in early September, showed that 77% rated the banking and financial system healthy.

This total was unchanged from 1994, matching the high for the 12 years of the survey series. But within the 77% was a significant favorable shift: the number rating the system "very healthy" rose to 17% from 14%.

On a differently worded question, 86% said they have at least some degree of confidence in banks' safety and security. Up by one percentage point this year, the confidence quotient has returned to the range of 1985- 1988, just before the slide in consumer confidence precipitated by the savings and loan bailout.

By 1992, the year after the Bank Insurance Fund rescue, the banking confidence reading hit its low of 74% - 17% having a "great deal" of confidence and 57% having "some."

This year, 30% had a "great deal" of confidence, up from 28% last year but still below the 1986 peak of 38%. Those with "some" confidence declined by one point, to 56%.

Bankers attribute the shifting, positive mood to the industry's record profitability. And they say it couldn't have come a minute too soon.

"People - and it may be subconscious - like to feel that the bank they do business with is safe and sound and well run," said John Shivers, president and chief executive of Southwest Bank in Fort Worth.

"They don't read the financial statements, but they see the stories in the newspaper and they know whether the industry is in good shape or not," he said.

Bankers and other experts concede that consumer confidence, while nice to have, does not have a direct business impact. Deposit insurance encourages individuals to put money into a bank without worrying about its financial condition - or that of the industry as a whole.

And they say confidence in the banking system is not the primary consideration for consumers with money to invest.

Instead, American consumers have become rate shoppers, said Joe Belew, president of the Consumer Bankers Association, Arlington, Va.

"People are more likely to put money into banks when they have confidence in the system," Mr. Belew said. "But at the same time, you have to look at returns. CDs just don't offer the returns that other investments do."

"People are still very rate-conscious," said Mr. Shivers.

But Edward Furash, chairman of Furash & Co., a Washington-based consulting firm, said Americans' renewed faith in banks presents the industry with some opportunities and removes a potential source of trouble down the road.

"The last low period in confidence affected people in several ways," said Mr. Furash. "They were driven to diversify their CDs to make sure they didn't have more than $100,000 in any one institution."

It was also a time of disintermediation, when people decided to move their money out of banks and into other types of instruments. Unfortunately, the current era of good feeling hasn't motivated people to move their money back, Mr. Furash added.

But the stronger banks look, the better position they will be in to capitalize on any missteps by competitors. And the survey indicated that many consumers trust their banks more than they trust the nonbank competitors; they even rate bank service quality higher. (See page 5.)

"If there were to be a crisis in the mutual fund industry - a breaking of the dollar asset value of money market funds, for example - people would begin moving back to banks," he said.

On the question, "How healthy do you personally think the U.S. banking and financial system is at the present time?," 17% responded "very healthy," 60% said "fairly healthy," 14% "fairly unhealthy," and 5% "very unhealthy." Another 4% of the sample of 1,027 households were not sure or gave no response.

Together, the unhealthy responses are at a historical low of 19%, in stark contrast to the 46% peak of 1991.

The related survey question was: "How much confidence do you personally have in the safety and security of the U.S. banking and financial system today?" Besides the 86% that replied some or a great deal, 10% said they had "very little," and 3% answered "none;" 1% gave no answer.

Most striking here, said Carole Hewitson, vice president of the Gallup Organization, is the recent turnaround in the number of people professing a great deal of confidence.

This group hovered between 15% and 18% from 1991 to 1993, then hit 28% last year.

The survey revealed a correlation between higher income levels and positive views about the industry's health. The system was rated healthy by 69% of people with annual household incomes below $20,000, by 76% of those between $20,000 and $40,000, by 79% of those between $40,000 and $75,000, and by 82% of those making more than $75,000.

On the confidence question, 91% at the $75,000- and-above income level said they had at least some confidence in banks.

Age didn't make much difference in confidence, nor did gender. But personal-computer ownership, which tends to be associated with higher educations, did. Of people who had PCs with modems, 81% said the banking system is fairly healthy or very healthy, and 92% expressed some or a great deal of confidence.

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