Banks In More Hot Water (FITB)

The Securities and Exchange Commission (SEC) is currently investigating several regional and community banks that may have accounted for troubled loans in a way in which it makes them appear healthier than they are. The SEC is seeking information from banks with particularly large concentrations of commercial real estate loans and is trying to detect a practice known as “extend and pretend.” This practice is when a bank gives the borrower more time to repay the loan by modifying it. Although a legal practice, the way banks are accounting for it may not provide an accurate picture of the condition of the loan, according to the article. Fifth Third Bancorp FITB disclosed on Monday that it was under investigation for the way in which it accounted and reported the state of its commercial real estate loans. Since the announcement, Fifth Third Bancorp's stock price dropped almost a dollar from $14.60 to $13.87. Banks have always been in the middle of some scandal or scheme, and to eliminate them from one's portfolio is a way to avoid the uncertainty of what can be a shady business. With the Dodd-Frank Act placing more stringent regulations on the large institutions in particular, it will serve to stifle the growth of large banks and likely their profits as well. Investors may wish to consider avoiding investment in banks currently. Bank stocks have rebounded enormously since the financial crisis in 2008, and with the current profit and growth outlook, perhaps your money could serve you better in another industry. Disclosures: long C Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.