WASHINGTON — While continuing to show signs of weakness, the banking industry managed a $2.8 billion profit in the third quarter, thanks to higher net interest income and growth in institutions' securities portfolios, the Federal Deposit Insurance Corp. said Tuesday.
The net income — reported in the FDIC's Quarterly Banking Profile — was more than three times higher than the industry's $879 million in net income from a year earlier, and a vast improvement over the $4.3 billion loss suffered in the second quarter.
The earnings were attributed in large part to a four-year high in net interest margins. The average margin was 3.51%, leading to a 4.8% rise in net interest income from a year earlier to $4.6 billion. The agency also said securities losses were significantly smaller than the losses from a year earlier, and the growth in noncurrent loans had slowed. Even though noncurrent loans rose by 10.5% in the quarter to $367 billion, it was the smallest increase in the past four quarters.
Still, the industry continued to showed signs that it has not fully recovered from the crisis. Net charge-offs and loan loss provisions continued to grow, with loss provisions — totaling $62 billion — exceeding $60 billion for the fourth quarter in a row. The FDIC's list of "problem" institutions also jumped 33% to 552. Assets of institutions on the list grew 15% to $346 billion.
"Today's report shows that, while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance," FDIC Chairman Sheila Bair said in a press release issued with the report.
The Deposit Insurance Fund's net balance continued its decline. The agency said the fund balance had reached an $8.2 billion deficit at the end of the quarter, and the ratio of fund reserves to insured deposits had fallen 38 basis points to -0.16%.