Daily News: November 27, 2013

FDIC: Legal Expenses, Mortgage Demand Shrink Q3 Bank Profits

The FDIC said commercial banks and savings institutions insured by the agency reported aggregate net income of $36 billion in Q3/13, a $1.5 billion (3.9%) decline from the $37.5 billion in profits that the industry reported a year earlier. This is the first time in 17 quarters — since Q2/09 — that earnings registered a year-over-year decline.

“The earnings decline was mainly attributable to a $4 billion increase in litigation expenses at one institution. Lower revenue from reduced mortgage activity and lower gains on asset sales also contributed to the reduction in earnings,” the FDIC said in a news release.

Half of the 6,891 insured institutions reporting had year-over-year growth in earnings, while half reported declines. The proportion of banks that were unprofitable fell to 8.6%, from 10.7% a year earlier. The FDIC also noted that industry earnings for Q2/13 had been revised downward, from $42.2 billion to $38.1 billion, as a result of expenses for goodwill impairment at two banks in the same organization.

“Most of the positive trends we have been seeing in industry performance continued in the third quarter,” noted FDIC chairman Martin J. Gruenberg. “Fewer institutions reported quarterly losses, lending grew at a modest pace, credit quality continued to improve, more banks came off the ‘Problem List,’ and fewer banks failed.”

For the complete Quarterly Banking Profile click here.

To read the full news release click here.