Tuesday, August 28, 2012

FDIC Quarterly Banking Report Suggests That U.S. Banks Have Returned to Pre-Recession Conditions

The FDIC released its Quarterly Banking Profile today for the second quarter, here are some highlights:

1. U.S. banks earned a total of $34.5 billion from April through June, a 20.7% increase compared to Q2 2011 (see chart above). Almost two out of every three (62.7%) of the 7,246 FDIC-insured banks reported higher earnings than a year ago. Only 10.9% were unprofitable, down from 15.7% in Q2 2011.  The increase in profits was the 12th consecutive year-over-year increase in quarterly net income for U.S. banks starting in Q3 2009, following ten consecutive decreases from Q1 2007 to Q2 2009. 

2. The $69.3 billion bank net income for the first half of 2012 was 21% above the same period last year, and highest profits for January-June since the $72.5 billion in 2007, five years go. 

3. Banks set aside $14.2 billion in provisions for loan losses in Q2, a 26.2% decline from Q2 2011, and is the smallest quarterly total in five years.

4. Net loan charge-offs (removed from balance sheet because of uncollectibility) totaled $20.5 billion in Q2, an $8.4 billion (29.1%) reduction from Q2 2011 and is the eighth consecutive quarter that charge-offs have declined from year-earlier levels and the lowest quarterly charge-off total since Q1 2008. All major loan categories posted lower charge-offs compared with a year ago.

5. Noncurrent loan balances (loans 90 days or more past due) declined for a ninth consecutive quarter, falling by $12.9 billion (4.2%). Noncurrent levels fell in all major loan categories.

6. The number of institutions on the FDIC’s “Problem List” fell for a fifth consecutive quarter, from 772 to 732. Total assets of “problem” institutions declined from $291 billion to $282 billion.

7. Fifteen banks failed during Q2 (following 16 failed banks in Q1) which is the lowest number of failed banks in a quarter since 12 banks failed in Q4 2008. 

MP: Overall, this is a very positive report for the financial conditions of U.S. banks in Q2: profits are strong (+20.7%), provisions for loan losses are at a 5-year low, net loan charge-offs fell by 29% in Q2 to a four-year low, noncurrent loans declined for the 9th quarter, the number of "problem banks" fell and the number of failed banks fell to a three- and-a-half year low.  Along with a gradually recovering overall economy, U.S. banks have gradually recovered and the financial health of the banking system has returned t0 pre-recession conditions. 


At 8/28/2012 1:28 PM, Blogger Jon Murphy said...

At the risk of reducing some of the seriousness of this post, THIS!

At 8/28/2012 1:55 PM, Blogger Methinks said...

Great! Would you kindly inform the Fed so it can stop suffocating short term rates and maybe grandma can finally retire?

Also at the risk of reducing the seriousness of this post, that headline can be read two ways!

At 8/28/2012 2:40 PM, Blogger Che is dead said...

Yes, believe it or not, the federal government is now starting another initiative to force banks to lend to low-credit-rated blacks and Hispanics -- not just anybody but specifically blacks and Hispanics -- and is threatening -- and already imposing -- huge punitive fines if they don't. Moreover, this time they're going even further. They're going to take over the credit rating agencies and force them to change their standards to accommodate blacks and Hispanics so that nobody will have any idea who is a bad credit risk and who is not. In so many words, the government is about impose its will on the whole home-lending market and force another round of bad loans so that the banks are going to be looted once again so that even the federal government may not be able to bail them out this time.

The principle instrument this time is not the Justice Department, Fannie Mae and Freddie Mac, as it was last time, but the brand-new Consumer Finance Protection Bureau, designed by good old Elizabeth "Nobody-Ever-Made-It-On-Their-Own" Warren, which should really be called the Bureau for Bringing Down the Entire Economy. As reported in last Sunday's New York Post by Hoover Institution Media Fellow Paul Sperry, the CFPB has just announced that it is adopting a 20-page "Policy Statement on Discrimination in Lending" issues by the Interagency Task force on Fair Lending in 1994 that kicked off Attorney General Janet Reno's draconic enforcement of the Community Renewal Act. .. -- "And You Thought the Housing Crisis Was Over!", American Spectator

At 8/28/2012 2:44 PM, Blogger Che is dead said...

Holder is turning the public against banks, eroding confidence in the financial sector. He's also eroding, further, the time-tested credit standards underpinning the economy. Among other things, he's ordered bank defendants to "modify" their lending policies to approve more minorities, regardless of their creditworthiness. He's also forced them to open branches in depressed urban areas, regardless of profitability. Wells, for one, must devote at least $50 million to down-payment assistance for homebuyers in predominantly minority areas of Chicago, Baltimore, Detroit, Miami, Oakland, Cleveland, Philadelphia and Washington, D.C. Thanks to a raft of settlements, Holder hasn't had to prove his charges in court. Of the nearly 20 major settlements he's wrung out of banks so far, he hasn't produced material evidence of lending discrimination in any of them. The Wells Fargo case is emblematic. After a three-year investigation, Holder accused Wells of charging blacks and Latinos a "racial surtax" for wholesale subprime mortgages. But like the Bank of America and other cases, the charges appear groundless .. -- "Holder To Banks: You're All Bigots", IBD

At 8/28/2012 2:52 PM, Blogger Che is dead said...

"Affirmative Action In Bank Lending Policy Promises Economic Disaster", Forbes

It was bad enough the government pressured banks to rubberstamp home loans for folks with poor credit scores. Now there's a more dangerous push to attack the credit-scoring system itself. The first shot across the bow was fired last week by the Washington Post. In a front-page story, it warned that "the country is headed toward a kind of financial segregation" from "long-lasting (credit) damage done to the black community." The Post said civil-rights groups and federal regulators fear blacks will be denied credit for years to come due to subprime foreclosures that have left deep scars on their credit reports. "Credit scores of black Americans have been systematically damaged, haunting their financial futures," said the Post, quoting the usual anti-bank suspects. These same Post sources demonized as racist the neutral credit-scoring system banks have used for half a century to measure risk in loans for homes, cars, college tuition and businesses. And they demanded the government review it for fairness, while forcing banks to "repair" the damaged credit of blacks. What the Post left out of its one-sided story is key history explaining how blacks were put in such jeopardy -- "Racial Arsonists' New Target: FICO Credit Scoring", IBD

You get the picture.

At 8/28/2012 7:14 PM, Blogger NormanB said...

It is convienent to throw out the bad years as if they didn't happen and as if bank lending practices to say nothing of what is really on their balance sheets are for real. Sorry, those losses that they took in the previous years have been reconstructed to be profits, now, so they are very suspect.

For the last 10 years these banks have averaged $58B per year in profits vs the $130B they are showing for the last 4 quarters. So, banks are now twice as profitable as their long term average. If currently they are selling at 10x then for the avg they are at 20x. Jump with confidence? Not me.

At 8/29/2012 10:24 AM, Blogger VangelV said...

FDIC Quarterly Banking Report Suggests That U.S. Banks Have Returned to Pre-Recession Conditions

LOL...I hope that you were trying to be ironic. Before the recession the banks were reporting fake profits based on mark to model accounting. They got hit so hard that they had to be bailed out by taxpayers. If they are back to those levels expect another collapse after the election is over.


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