The Federal Deposit Insurance Corporation (FDIC) reported that commercial banks and savings institutions brought in aggregate net income of $37.6 billion during the third quarter this year. That represents a 6.6% improvement over the same time period last year, when banks posted $35.2 billion in profit.
There were also fewer problem banks this past quarter and more loans, which are good economic indicators. This is the 13th consecutive quarter in which bank profits have increased, said FDIC Chairman Martin Gruenberg . “Signs of further progress were evident in a number of indicators, such as loan growth, asset quality and profitability,” he said.
Improving economic indicators
Other improvements include the news that banks charged off $22.3 billion in loans, which is a 16.5% decrease from the third quarter of 2011. Loss provisions were $14.8 billion, compared with 18.6 billion in last year’s third quarter. Over half of all FDIC-insured financial institutions reported quarterly net income improvements, and 10.5% reported net losses last quarter.
Bank failures were down in the third quarter. Only twelve institutions failed in that time period – the lowest number since the fourth quarter of 2008. So far this year 50 banks have failed, compared to 90 banks by this time last year.
Fewer problem banks and more loans
For the sixth quarter in a row, the number of so-called “problem banks” fell – from 732 to 694. This is the first time that number has dipped below 700 in three years, a very positive indicator for the economy. Problem bank assets totaled $262 billion, down from $282 billion the previous quarter.
Loan balances increased for the fifth time in the last six quarter, which means credit lines are loosening up. Residential mortgages are up by $14.5 billion, commercial and industrial loans rose $31.8 billion, and auto loans are up by $7.4 billion. Gruenberg said that overall, “more than 55 percent of all banks reported loan growth. Small banks are also increasing their lending, including their loans to small businesses.” To see the full report go to FDIC’s Quarterly Banking Profile.
