U.S. banking industry earned $14.5 Billion in 3Q, up from last year's $2 Billion

U.S. banking industry earned $14.5 Billion in 3Q, up from last year's $2 Billion

2010-11-23 23:27:06 GMT+7 (ICT)

WASHINGTON, D.C. (BNO NEWS) -- Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $14.5 billion in the third quarter, a $12.5 billion improvement from the $2 billion the industry earned in the third quarter of 2009.

Almost two-thirds of all institutions (63.3 percent) reported improvements in their quarterly net income from a year ago, but nearly one in five institutions (18.9 percent) had a net loss for the quarter.

The average return on assets, also known as ROA, a basic yardstick of profitability, rose to 0.44 percent, from 0.06 percent a year ago.

"The industry continues making progress in recovering from the financial crisis," said FDIC Chairman Sheila C. Bair. "Credit performance has been improving, and we remain cautiously optimistic about the outlook."

"Lower provisions for loan losses are driving bank earnings by allowing a larger share of revenues to reach the bottom line," Bair added, as the quarter represents the fifth consecutive in which earnings have registered a year-over-year increase.

However, the credit cycle it is "too early" for institutions to be reducing reserves without "strong evidence of sustainable, improving loan performance and reduced loss rates," Blair stated, adding that institutions "should always err on the side of caution" when it comes to the adequacy of reserves.

Chairman Bair also indicated that the end of a two-year period of contraction in loan portfolios may have run its course.

"Total loans and leases held by FDIC-insured institutions declined by just $6.8 billion, or 0.1 percent, in the third quarter," she said. "Many large banks have had sizable reductions in their loan portfolios over the past couple of years, but in the third quarter, such reductions were notably absent. I hope we are close to seeing genuine increases in loan balances again."

Total assets increased by $163 billion (1.2 percent) during the quarter, while investment securities holdings increased by $113.7 billion (4.5 percent). Assets in trading accounts rose by $86.9 billion (12.8 percent).

The primary factor contributing to the year-over-year improvement in quarterly earnings was a reduction in provisions for loan losses.

While quarterly provisions remained high, at $34.9 billion they were $28 billion (44.5 percent) lower than a year earlier. Net interest income was $8.1 billion (8.1 percent) higher than a year ago, and realized gains on securities and other assets improved by $7.3 billion from a year ago.

The FDIC noted signs of further improvement in asset-quality trends as the amount of loans and leases that were noncurrent - 90 days or more past due or in nonaccrual status - fell for a second consecutive quarter.

Insured banks and thrifts charged off $42.9 billion in uncollectible loans during the quarter, down $8.1 billion (15.8 percent) from a year earlier. This is the second quarter in a row that net charge-offs posted a year-over-year decline.

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