Oil-State Banks See Flat Results For 3rd Quarter --- Diversified Economies Mean Higher Prices for Crude Don't End Area's Slump
Contrary to popular belief, Southwestern banks didn't get a boost from soaring oil prices in the third quarter.</br></br>"I think it's too early to see any of the benefits" from the price rise spurred by the Mideast crisis, said Frank Anderson, a banking analyst with Stephens Inc., Little Rock, Ark. "I don't think the Texas economy is going to improve a lot in the near term," he said, although "the psychology is so much better."</br></br>Some analysts say the run-up in oil prices actually could prove detrimental to energy-state economies and therefore to banks in the region. Since the last boom-bust cycle in the oil industry, many of those economies have diversified into industries more closely linked to the general U.S. economy. Thus, the reasoning goes, if higher energy costs cause a recession in the rest of the U.S., states such as Texas would suffer too.</br></br>According to Sandra J. Flannigan, an analyst with Alex. Brown & Sons Inc., Baltimore, oil and gas accounted for only 15% of Texas's economic output in 1989, compared with a peak of 27% in 1981.</br></br>Energy companies, worried that prices could sink again as fast as they rose, are being much more cautious about new investments and exploration this time. And because their extra income isn't being spread around much yet, employment, loan growth and demand for real estate remained depressed in the third quarter, bankers and analysts say.