Tuesday, February 28, 2012

Bank Profits and Average ROA Highest Since 2006

From today's Quarterly Banking Profile from the FDIC:

"For all of 2011, bank net income totaled $119.5 billion, an increase of $34 billion (39.8%) from 2010 earnings. This is the highest annual net income total since the industry earned $145.2 billion in 2006. More than two out of every three banks (66.9%) reported improved earnings in 2011, and only 15.5 percent reported a net loss for the year. In 2010, 22.1 percent of all banks reported full-year net losses. The average ROA in 2011 was 0.88%, up from 0.65% in 2010. The improvement in full-year net income was made possible by an $81.1 billion reduction in loan loss provisions."

MP: Bank profits last year were almost 20% above the pre-recession 2007 level, the average ROA was the highest since 2006, and the number of bank failures in 2011 was 92, down from 157 in 2010 and 140 in 2009.  Today's FDIC report provides evidence that U.S. banks are gradually recovering from the financial crisis of 2008-2009, and in 2011 had their best year since 2006.

Update 1: Over the last three months, the KBW Bank Index has gained more than 25% compared to a 15% increase in the S&P500 over that period.  

Update 2: See related LA Times story "Bank earnings hit five-year high in 2011."


At 2/28/2012 2:01 PM, Blogger morganovich said...

well, you book a nice profit when you sell a loan to freddy and fannie.

then, you get to use the capital again when you buy levered treasuries.

i fear that absent F+F buying up 90% of mortgage origination, these numbers would not look nearly so good.

At 2/28/2012 2:25 PM, Blogger Benjamin Cole said...

The worst is over, and gradual recovery will continue. The Fed could juice things up a bit; Obama could have postponed or altered Obamacare---no matter, recovery is continuing.

At 2/28/2012 2:33 PM, Blogger juandos said...

Well if Warren Buffett is to be believed maybe the future of banks is something less than rosy...


At 2/28/2012 2:48 PM, Blogger morganovich said...

and yet the BKX is 45, down from 121 in 2007 and has been mired in a range for years at a level about like 1996.

it would seem the market is less convinced on the quality of these earnings.

if these earnings are of high quality, there's a great buy opportunity here, but personally, i wouldn't touch them.

At 2/28/2012 4:55 PM, Blogger Benjamin Cole said...

DJIA closes over 13k, up from 8k when Bush jr. left office. That's a 60 percent run.

I think it is the first leg of the bull market.

At 2/28/2012 5:25 PM, Blogger Methinks said...

There's a lot of bull in the market all right, Benji.

At 2/28/2012 7:41 PM, Anonymous Anonymous said...

Subsidize & demonize. That is Washington's strategy. Prop a sector up unnecessarily, then later we'll beat up on them on public to score political points.

At 2/28/2012 8:52 PM, Blogger Nicolas Martin said...

Not exactly a triumph of the free market, is it?

At 2/29/2012 3:29 AM, Anonymous Anonymous said...

As others have pointed out, this market is being subsidized in many different ways, not all of them easy to measure, so these numbers are tough to read. I'll also note that the biggest failures of the recent financial bust were not FDIC-insured banks, who were mostly merged quickly, but investment banks like Bear, Merrill, and Lehman, who were not covered by the FDIC. Also, Goldman and Morgan Stanley turned themselves into bank holding companies to avail themselves of that govt safety net, so their recent big numbers might be skewing these stats, if they're being included here. Banking and finance is a mess and the whole system will likely be blown up by internet startups, rather than ever go back to anything resembling the way things were.

At 2/29/2012 3:33 PM, Blogger morganovich said...


i should have held onto those TZA's i bought last time you called "bull market".

would be up $1.

if i had bought the open right after your comment, i'd have a nice profit too.

you truly are a wonderful indicator.

At 2/29/2012 4:30 PM, Blogger morganovich said...

"Over the last three months, the KBW Bank Index has gained more than 25% compared to a 15% increase in the S&P500 over that period. "

the bkx is also 11% below where it started 2011 and 63% below its 2007 high as compared to an 8% gain and 13% off the highs for the S+P.

time-frames matter.


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