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Bank profits rose 37% in fourth quarter, FDIC says

February 26, 2013|By E. Scott Reckard
  • The San Francisco headquarters of Wells Fargo & Co.
The San Francisco headquarters of Wells Fargo & Co. (E. Scott Reckard / Los Angeles…)

Despite a pinch from low interest rates, America’s 7,083 federally insured banking firms turned in the second-highest annual earnings in history last year -- $143.3 billion, according to the Federal Deposit Insurance Corp.

That was more than 19% higher than in 2011, the FDIC said, and topped only by the $145.2-billion profit the banks recorded in 2006, before the mortgage industry melted down, triggering the financial crisis.

Fourth-quarter profit jumped 37% from the previous year to $34.7 billion at U.S. banks and savings and loans, as losses on loans and foreclosure sales fell and income from sales of mortgages increased, the FDIC reported Tuesday.

"The improving trend that began more than three years ago gained further ground in the fourth quarter," FDIC Chairman Martin J. Gruenberg said.

Quiz: 2012 in business

The picture is not entirely rosy. Institutions such as Bank of America Corp. are still dealing with billions of dollars in fallout from loans made during the housing boom, and the industry's profit was down slightly from $37.6 billion in the third quarter. Many small banks are struggling to grow their loan books. And layoffs are the trend on Wall Street.

Still, the number of banks on the FDIC's "problem list" declined for a seventh consecutive quarter, falling to 651 from 694 at the end of the third quarter.  During the recent financial crisis, the number of these banks at high risk of failure peaked at 888 at the end of the first quarter of 2011.

Banks set aside $15.1 billion in loan-loss provisions in the fourth quarter, a reduction of $4.9 billion, or 24.6%, compared with fourth quarter 2011.

It was the smallest fourth-quarter loss provision since 2006, and marked the 13th consecutive quarter with a year-over-year decline in loss provisions. The FDIC said 53.6% of all institutions reported lower loss provisions.

Increasing income from fees and loan sales helped offset a decline of $2.7 billion, or 2.5%,  year-over-year in net interest income, the difference between what banks pay for deposits and earn on loans.

Fourth-quarter net interest income totaled $104.4 billion, compared with $107.1 billion in 2011. It was the lowest quarterly total since the fourth quarter of 2009. The average net interest margin fell to 3.32%, down from 3.57% a year earlier.

ALSO:

JPMorgan to cut 4,000 jobs this year

Wells Fargo earnings beat expectations

Banks step up mortgage debt forgiveness

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