Katrina aftermath kick-starts economic activity

BANKS and brokerage firms in New Orleans say they’re faring better than before Hurricane Katrina caused a record $80 billion (€62.5bn) of damages along America’s Gulf Coast a year ago.

JP Morgan Chase & Co, the third-biggest US bank, said deposits from the region jumped 78% in the past year, helped by the opening of 50,000 cheque accounts.

Merrill Lynch & Co, the region’s largest brokerage firm, said revenue in July from its four branches near New Orleans was 10% higher than a year ago.

Earnings at Louisiana’s 134 state-chartered banks jumped 23% to $185m (€144m) in the first half of 2006 from a year ago, according to the Federal Deposit Insurance Corporation.

New Orleans residents are opening bank and brokerage accounts with money received from insurance companies and government relief agencies, and are taking out loans to repair homes.

“It’s ironic that New Orleans was a little-to no-growth market,” said Kevin Fitzsimmons, a banking analyst at Sandler O’Neill & Partners.

“If things get rolling and the city starts to rebuild, you could have several years of growth.”

Katrina forced more than 160,000 families in Louisiana, Alabama and Mississippi to seek refuge in motels, trailer homes and other temporary quarters. The property and casualty insurance industry estimates that payments on Katrina-related claims will total $40.6 billion (€31.6bn), including $15.5bn (€12.1bn) paid on homeowner policies.

Some of those funds are sitting in bank and brokerage accounts. Average deposits at Whitney Holding, the largest bank based in New Orleans, swelled $1.7bn (€1.3m), or 24% paid in the second quarter.

“There’s a better business environment in New Orleans than people think,” said John Kallenborn, president of JP Morgan Chase’s New Orleans region.

John Morgan, who owns and manages a branch for Raymond James Financial, said assets under management are up about 20% in the past year to $300m (€233m).

Home loans are up as much as 20% at Fifth District Savings Bank.

President Michael Nolan said: “We had 140 square miles of this city under water and those people have to live somewhere”.

The population within the city was about 225,000 in June, up from 158,353 in January, but down from 437,186 last July.

Some of those that left for good worked in financial services. Regions Financial’s south Louisiana offices lost 150 of about 400 employees.

Even so, revenue per broker for the dozen who returned was about 18% higher in July than a year ago, and overall assets are up about 7% to branch manager John Galbraith.

Many clients received insurance-settlement cheques — the typical amount is about $150,000 (€116,000) — and parked the proceeds in Treasury bills and other fixed-income securities while waiting for contractors to obtain building permits and assemble construction crews, he said.

Executives from the energy industry, among the largest brokerage clients, are “bustling,” said Charles Genois, owner of financial-advisory firm Charles Genois & Co.

Crude oil futures prices on the New York Mercantile Exchange averaged about $66 a barrel in the past year, about 27% higher than the previous year. Natural-gas prices were up 28%.

It’s not all good news, as many lenders were hurt by loans that went sour in the months after the storms.