FDIC: Q1 Bank Earnings Improve, But Loan Balances Decline
In its latest quarterly report, the FDIC said that insured commercial banks and savings institutions reported an aggregate profit of $35.3 billion in the first quarter of 2012, a $6.6 billion improvement from the $28.8 billion in net income the industry reported in the first quarter of 2011. The FDIC noted that lower provisions for loan losses and higher non-interest income were responsible for most of the year-over-year improvement in earnings.
This is the 11th consecutive quarter that earnings have registered a year-over-year increase. However, loan balances declined by $56.3 billion (0.8%) after three consecutive quarterly increases.
FDIC acting chairman Martin J. Gruenberg said, “The condition of the industry continues to gradually improve. Insured institutions have made steady progress in shedding bad loans, bolstering net worth, and increasing profitability.” He also noted, “The overall decline in loan balances is disappointing after we saw three quarters of growth last year. But we should be cautious in drawing conclusions from just one quarter.”
First-quarter loss provisions totaled $14.3 billion, almost one-third less than the $20.9 billion that insured institutions set aside for losses in the first quarter of 2011. Net operating revenue (net interest income plus total non-interest income) totaled $169.6 billion, an increase of $5 billion (3.1%) from a year earlier, as gains from loan sales rose by $2.3 billion. Realized gains on investment securities and other assets were $2 billion higher than in the first quarter of 2011.
Asset quality indicators continued to improve as insured banks and thrifts charged off $21.8 billion in uncollectible loans during the quarter, down $11.7 billion (34.8%) from a year earlier. The amount of non-current loans and leases (those 90 days or more past due or in non-accrual status) fell for an eighth consecutive quarter, but the percentage of loans and leases that were non-current remained high by historical standards.
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