FDIC Says U.S. Banks Q3 Earnings Surge, But Watch Out for Q4

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The Federal Deposit Insurance Corporation (FDIC) said the earnings of U.S. commercial banks and savings institutions surged by 6.6 percent or $2.3 billion during the third quarter of the current fiscal year.

According to FThe Federal Deposit Insurance Corporation, the banking industry posted collective net income of $37.6 billion for the third quarter, higher than the $35.2 billion aggregate income reported during the same period last year. The third result indicated that the banking industry experienced the highest level in earnings growth over the past six years, and the 13th consecutive quarter of earnings increase year-over-year.

The FDIC said 57.5 per cent of institutions within the banking industry reported positive quarterly earnings performance. In addition, the number of institutions reporting quarterly net losses declined from 14.6 percent last year to 10.5 percent. Furthermore, the average return on assets (ROA) climbed from 1.03 percent to 1.06 percent. The ROA is the fundamental measurement of profitability.

The Federal Deposit Insurance Corporation also noted that the number of banks on its “Problem List” declined for the sixth consecutive quarter from 732 to 694. It is also the first time in three years that the number of institutions included in the problem list fell by less than 700. The total assets of problematic banks reported a decline in total assets from $282 billion to $262 billion.

In addition, the total loan loss provisions for the third quarters were $14.8 billion, 20.6 percent lower than the $18.6 billion total loan provisions during the same period in 2011.

Furthermore, the banking industry’s total net operating revenue was $169.9 billion, a 3 percent increase or $4.9 billion. The outcome was driven by high loan sales, which increased by $3.9 billion during the period. Net interest income rose by 0.7 percent t0 $746 million.

FDIC Chairman Martin J. Gruenberg said, “This was another quarter of gradual but steady recovery for FDIC-insured institutions. Signs of further progress were evident in a number of indicators, such as loan growth, asset quality and profitability.”

During the third quarter, the asset quality indicators continues to show signs of improvements as insured banks and thrifts charged off $22.3bn in uncollectible loans, 16.5 percent of $4.4 billion lower than the amount recorded in 2011.

The amount of noncurrent loans and leases (those 90 days or more past due or in non accrual status) dropped for the 10th consecutive quarter.

Last month Deutsche Bank analyst Matt O’Connor lowered his 4Q earnings per share estimates for Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), and Goldman Sachs Group, Inc. (NYSE:GS).

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