The Interviews - Experts Address Recent Fraud Headlines. This collection of interviews offers analysis of recent financial fraud events and cases.
Posted on 6th Sep 2012 @ 7:46 AM
Commercial banks and savings institutions recorded their 12th consecutive quarter in which earnings have registered a year-over-year increase, the Federal Deposit Insurance Corporation reported in its Quarterly Banking Profile for the second quarter. The industry logged aggregate net income of $34.5 billion in the quarter, a $5.9 billion improvement from the second quarter of 2011.
"The banking industry continued to make gradual but steady progress toward recovery in the second quarter," FDIC Acting Chairman Martin J. Gruenberg said. "Levels of troubled assets and troubled institutions remain high, but they are continuing to improve. After declining in the first quarter, loan balances once again expanded in the second quarter — extending a positive trend that began in 2011. Most institutions are profitable and are improving their profitability. All of these trends are consistent with the moderate pace of economic growth that has occurred over the past year."
Almost two-thirds of all institutions (62.7 percent) reported improvements in their quarterly net income from a year ago. The share of institutions reporting net losses for the quarter fell to 10.9 percent from 15.7 percent a year earlier. The average return on assets rose to 0.99 percent from 0.85 percent a year ago. Loss provisions totaled $14.2 billion, more than 26 percent less than the $19.2 billion set aside in the second quarter of 2011. Asset quality indicators continued to improve as insured banks and thrifts charged off $20.5 billion in uncollectible loans during the quarter, down $8.4 billion (29.1 percent) from a year earlier.
Problem Banks and Bank Failures
The FDIC reported that the number of "problem" institutions fell for the fifth quarter in a row, declining from 772 to 732. That’s the smallest number of "problem" banks since year-end 2009. Total assets of "problem" institutions declined from $292 billion to $282 billion.
Fifteen insured institutions failed during the second quarter. This is the smallest number of failures in a quarter since the fourth quarter of 2008, when there were 12. Another nine banks have failed so far in the third quarter, bringing the total for the year to date to 40. At this point last year, there had been 68 failures.
Watching Closely—Net Interest Margin and Loan Growth
Chairman Gruenberg called the net interest margin an ongoing challenge, but he said the second quarter’s resumption of overall loan growth was an encouraging development the FDIC will be watching closely. Gruenberg also noted that the industry’s improvement in net income has been driven thus far by reductions in reserves made possible by improving credit quality.
“But there’s only so far that can take you,” he added. “[A]t some point you’re going to need to see sustained growth in lending, and we hope that trend, which is emerging, can continue.”
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