Bloomberg News

Banks’ Earnings Rose 23% on Loan-Loss Provisions, FDIC Says

February 28, 2012

U.S. lenders had net income of $26.3 billion in the fourth quarter, increasing earnings by 23.1 percent over the same period in 2010 on lower provisions for loan losses, the Federal Deposit Insurance Corp. said today.

Lenders put aside 12.1 percent of net operating revenue for bad loans, and charge-offs fell by 40 percent to the lowest level since the first quarter of 2008, the FDIC said in its Quarterly Banking Profile released in Washington. Loan losses fell to $25.4 billion, the lowest in 15 quarters, the FDIC said. Full-year earnings reached $119.5 billion, the highest since 2006, the agency said.

“Gains have been driven by reductions in provisions for loan losses, and that can’t go on indefinitely,” FDIC Acting Chairman Martin Gruenbergsaid in a briefing with reporters. “The real key is going to have to be a pickup in lending.”

Loan balances grew by $130.1 billion in the fourth quarter on loans to commercial and industrial borrowers, the largest rise in four years. Gruenberg called the growth “encouraging.”

“Quarter after quarter, the banking industry continues to gain strength,” James Chessen, chief economist at the American Bankers Association said in a statement. “Increasing loans, strong capital levels, sharply declining problem assets and an inflow of deposits mark a steady improvement in our industry’s financial performance.”

The FDIC’s confidential list of “problem” banks -- those deemed to be at greater risk of collapsing -- fell for a third straight quarter to 813 from 844, the agency said. There were 18 failures in the three-month period that ended Dec. 31, bringing the year’s total to 92, compared with 157 in 2010.

The agency’s deposit insurance fund, which protects customer holdings up to $250,000 per account in the event of a failure, rose to $9.2 billion from $7.8 billion in the preceding quarter, the FDIC said.

To contact the reporter on this story: Clea Benson Washington at cbenson20 @bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at Mreynolds34@bloomberg.net


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