WASHINGTON – The banking industry earned $28.8 billion in the second quarter as the result of lower provisions for loan losses.
At the same time, data released by the FDIC showed the regulatory watch list of troubled banks shrank for the first time in nearly five years.
The FDIC’s “Quarterly Banking Profile” showed many positive signs for the industry. Net income was nearly 38% higher than a year earlier, registering the eighth straight quarter with year-over-year earnings growth. Total loans rose 0.9% in the quarter to $7.3 trillion, the first such increase in three years, according to the FDIC.
Nearly 60% of all institutions had better quarterly earnings than a year earlier, and the 15% of unprofitable institutions was the lowest level since the first quarter of 2008.
Meanwhile, the Deposit Insurance Fund was in the black for the first time since the middle of 2009. “The latest data indicate that banks have continued to make gradual but steady progress in recovering from the financial market turmoil and severe recession that unfolded from 2007 through 2009,” Martin Gruenberg, the FDIC's acting chairman, said in a prepared statement.
Yet the report indicated the industry still has ground to cover in terms of growth. Net operating revenue was lower than a year earlier for the second straight quarter. Net interest income declined by 1.7% to $105.9 billion, as some of the largest banks reported lower asset yields. Non interest income declined by 1.9% from a year earlier to $58.4 billion.
Gruenberg said despite the ‘modest improvement” in lending, “we also saw continued weakness in revenues, and we are mindful that earnings growth cannot be sustained indefinitely only by reducing loss provisions.”
“Lack of revenue growth limits the pace of earnings improvement,” he said.
Loss provisions fell 53% from the second quarter of 2010 to $19 billion, the seventh consecutive such decline, and banks reported “sizable declines in noncurrent loans,” the FDIC said. Noncurrent loans fell 6.5% from the first quarter to $319 billion.
