Saturday, May 26, 2012

Bank Earnings Reach 5-Year High in Q1 2012

The FDIC reported this week that bank profits in the first quarter of 2012 increased to $35.3 billion, the highest level in almost five years going back to the second quarter of 2007 (see chart above, data here).   That represents a 23% gain from the first quarter last year, and a 38% improvement from the previous quarter.  In other signs of improvements in the banking industry's financial condition, noncurrent loan rates and net chargeoff rates decreased in the first quarter this year compared to the same quarter last year, and in both cases there were decreases for all three loan categories: real estate, business and consumer.

11 Comments:

At 5/26/2012 10:07 PM, Blogger VangelV said...

Sorry but we heard this story just before the banking system had to be bailed out. I do not see things as rosy as is being indicated.

 
At 5/27/2012 4:21 AM, OpenID clearlypolitics.com said...

In response to Vangel it was JP Morgan specifically that had a bad loan, right?

 
At 5/27/2012 8:38 AM, Blogger PeakTrader said...

The depression, or the U.S. economy underproducing by $1 trillion a year, continues with only 2% to 3% real annual growth.

Economic outlook for 2012
January 5, 2012

"U.S. banks remain troubled and aren't lending money to small and medium-sized businesses.

After buying up smaller banks that can't cope with new, tougher regulations, Wall Street banks control more than 60 percent of deposits nationally and are driving down Certificate of Deposit rates (essentially exploiting monopoly positions as they acquire banks in regional markets) and aren't making enough loans to Main Street businesses.

Instead, Wall Street banks are using deposits to engage in other, non-traditional-banking activities that don't move the economy forward."

 
At 5/27/2012 8:54 AM, Blogger PeakTrader said...

The E.U. in recession and a China hard landing will slow U.S. economic growth.

However, contractionary U.S. fiscal policy (with continued overregulation) will likely tip the country into recession:

"Fiscal cliff" could cause U.S. recession: CBO
May 22, 2012

"A wave of U.S. tax hikes and automatic spending cuts - dubbed the "fiscal cliff" - are set to take effect in January unless Congress and the White House agree on ways to delay or revise at least some of them.

The CBO, the official budget and economic analyst for lawmakers, said the U.S. economy would contract at an annual rate of 1.3 percent for the first half of 2013 if lawmakers take no action to prevent the looming tax hikes and spending cuts.

Historically low tax rates enacted under former President George W. Bush in 2001 and 2003, and jobless benefits for the long-term unemployed are both set to expire on December 31, as is a temporary payroll tax cut.

In addition, $1.2 trillion in across-the-board reductions in spending on federal programs would begin to phase in as a result of Congress' failure late last year to find a comprehensive deal to cut the budget deficit."

 
At 5/27/2012 8:55 AM, Blogger Duncan said...

Seems wrong that it is government policy to make the banks profitable. The arguement goes, low short term rates set by fed increase lending margins, increases bank capital, increases ability of banks to lend, increases borrow, leads to risk taking, leads to more investment in production, leads to more actually productions, leads to greater consumption and expanding economy. Sounds good on paper if it actually works. Tax payer alway ends up paying for it through artificially low returns on savings, diverted resources to banks that might have been better used, dollar devaluation, moral hazard. The 2 billion loss at JP is a rounding error compared to the trillions the banks recieve through artificially low rates.

 
At 5/27/2012 9:34 AM, Blogger VangelV said...

The 2 billion loss at JP is a rounding error compared to the trillions the banks recieve through artificially low rates.

Somehow, I think that unless someone at the Fed or Treasury intervenes the number will be much bigger than $2 billion.

 
At 5/27/2012 9:43 AM, Blogger VangelV said...

Instead, Wall Street banks are using deposits to engage in other, non-traditional-banking activities that don't move the economy forward

The big banks are engaging in gambling activities by using deposits for their trading programs. One big problem is the an accounting method that can make everything look great right until the bus drives over the cliff.

 
At 5/27/2012 9:57 AM, Blogger VangelV said...

In response to Vangel it was JP Morgan specifically that had a bad loan, right?

It was not a loan. JPM made a lousy bet that it claimed was a hedge. We will see how large the loss turns out to be after the hedge funds make bets against a position that JPM has to unwind. Unless the regulators get in to help out the bank we could see a massive loss.

 
At 5/27/2012 12:16 PM, Blogger bart said...

PT:
The depression, or the U.S. economy underproducing by $1 trillion a year, continues with only 2% to 3% real annual growth.


Only if you believe the deflator, which has averaged a pitifully low 2.25% since 2000.

If anyone believes that inflation in what the government buys has only averaged 2.25%, then I have some ocean front property in Idaho I'd like to sell you.

 
At 5/27/2012 12:17 PM, Blogger bart said...

Full data series on bank profits since 1984:

http://www.nowandfutures.com/images/bank_earnings1984on.png

 
At 5/29/2012 5:45 AM, Blogger geoih said...

Amazing what trillions of dollars of government graft can do for your bottom line.

 

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