WASHINGTON -- Among the nation's largest banks, California's big. three stand to save the most when the cost of deposit insurance comes down next year.
Bank of America will save $215.5 million a year before taxes once the Federal Deposit Insurance COrp. shaves its rates, according to a study by Natwest Washington Analysis. That's 57 cents a share.
Wells Fargo's net savings are much less, $74.9 million, but on a per-share basis the San Francisco bank tops Natwest's list at $1.42 a share.
First Interstate's pretax savings will total $84.3 million, or $1.05 a share, Natwest concluded.
Deposit insurance premiums are expected to fall from an average 23 cents per $100 of domestic deposits to a nickel in mid- to late 1995.
The FDIC will be free to lower bank premiums once the Bank Insurance Fund holds $1.25 for every $100 of insured deposits.
Sam Leaman, a financial analyst at Natwest in Washington, said Bank of America, Wells Fargo, and First Interstate top the list because they "have an extensive domestic deposit network."
The FDIC uses total domestic deposits to calculate how much a bank owes for deposit insurance. Foreign deposits are not currently included in the assessment base, but the FDIC is expected this fall to propose some changes to the base.
In contrast to the big California banks, Citibank is at the bottom of Natwest's list because the New York giant has relatively few domestic deposits.
Citibank's $91.5 million in pretax savings translates into just 18 cents a share, Natwest reported.
"If they had to pay on foreign deposits, then you'd have a different story," Mr. Leaman said. When the FDIC lowers deposit insurance rates, more banks will go after domestic deposits, he predicted. " Three other banks will save more than 50 cents a share, According to Natwest: NationsBank will save $155.2 million before taxes, or 55 cents a share; First Union will save $92.9 million, or 54 cents a share; and Chemical will save $128.5 million, or 52 cents a share.
Exactly when deposit insurance rates will come down is uncertain. The bank fund is likely to hit its 1.25% target sometime next year. But the FDIC is already being pressured to keep bank rates in line with what thrifts pay for inSUrance. Thrifts are not likely to see a premium reduction until 2004, when recapitalization of the Savings Association Insurance Fund is completed.
"This is going to be the issue next year," Mr. Leaman said,
