The U.S. banking industry, for the first quarter of 2013, posted record earnings of $40.3 billion, which was up 15.8 percent from the same period in 2012. The all-time quarterly high earnings were the result of one-time changes in income and expenses at big banks, says a report issued Wednesday from Federal Deposit Insurance Corp (FDIC).

Banks Q1

Factors that helped the Banks

As per the data from the FDIC, previous quarterly high was at a time when the banking industry was smaller in size, in terms of total assets.  The one-time items such as lower legal costs and proceeds from a settlement enhanced the first quarter earnings. According to FDIC, the quarter also marks the lowest amount set aside by banks as provisions for loan losses, in six years. The banks Lenders set aside $11 billion for bad loans, which is 23 percent less from the previous year.

Positive/Negative Takeaways

For the quarter, asset quality showed improvements, also there was more numbers of profitable institutions, and less numbers of problem banks and bank failures, says FDIC Chairman Martin Gruenberg in a statement. During the quarter, only four FDIC-insured banks failed, which is the lowest since the second quarter of 2008. Also, asset quality showed improvements with 16 billion in charge-offs. For the quarter, 92 percent of the banks posted positive income despite narrowing interest-income margins.

“However, tighter net interest margins and slow loan growth create an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention,” he added. For the quarter, net operating revenue were up 1.6 percent or $2.7 billion to $170.6 billion, from last year.

For the quarter, loan balances fell by $36.8 billion along with a 5.2 percent fall in credit-card balances.

Q1 Earnings of Some big banks

For the first quarter, Citigroup Inc (NYSE:C) reported higher-than expected profits. The profits for the bank were up 30 percent with a net income of $3.81 billion or $1.23 per share versus $2.93 billion or 95 cents per share a year earlier.

JPMorgan Chase & Co. (NYSE:JPM) reported record first quarter earnings. Net income for the bank came in at 6.5 billion or $1.59 per share on $25.8 billion in revenue. The number beat the consensus estimates of $1.39 per share on $25.7 billion in revenue.

Wells Fargo & Company (NYSE:WFC) reported record revenues of $5.2 billion for the first quarter, and earnings per share for the bank was up 23 percent.

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