WASHINGTON – Bank and thrift earnings slid a whopping 94% in the third quarter from one year earlier, to $1.7 billion, according to data released by the Federal Deposit Insurance Corp. (FDIC).
Data show the industry’s return on assets fell to 0.05%, from 0.92% a year earlier – the second-lowest quarterly ROA reported in 18 years. The FDIC said that “evidence of a deteriorating operating environment was widespread.”
Earlier, NCUA reported that credit unions’ key profitability ratio, return on assets, eroded to 0.12%, the lowest level in decades. Among banks, meanwhile, nearly 60% of institutions reported year-over-year declines in quarterly net income, while one in every four institutions reported a net loss during the third quarter.
The FDIC said the earnings decline primarily was due to rising loan-loss provisions, which totaled $50.5 billion in the third quarter, more than three times the $16.8 billion level of a year earlier. The industry also reported a $7.6 billion loss on the sale of securities and other assets in the third quarter, compared to a $77 million gain a year earlier.
The housing crisis caused nine banks to fail during the quarter, and more collapses are likely. The agency added more than 50 institutions to the troubled bank list, which reached 171 as of Sept. 30. Assets held by these institutions jumped $37 billion, to $115.6 billion. It was the first time in 14 years troubled bank assets topped $100 billion, the agency said.
Failures also continued to pressure the ratio of reserves to insured deposits in the Deposit Insurance Fund. Reserves dropped 23%, to $34.6 billion in the third quarter. As a result, the DIF ratio fell to 0.76%, well below the statutory minimum of 1.15%.
The FDIC already has said it will double premiums next year to between 10 to 14 basis points. If the ratio continues to drop, the agency may need to raise that level even higher.
