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Banks turn a profit

By Marcie Geffner · Bankrate.com
Wednesday, December 8, 2010
Posted: 9 am ET

Consumers are feeling the pinch of a weak economy, but banks and thrifts are doing okay, judging by recent statements from the National Foundation for Consumer Counseling, or NFCC, the Federal Deposit Insurance Corp., or FDIC, and the federal Office of Thrift Supervision, or OTS.

First, the consumers. A recent NFCC poll found that 91 percent of consumers planned to cut back on holiday spending or not spend at all this holiday season, due to financial distress or pressure. Specifically, 57 percent of those who responded said they planned to cut back on spending, 34 percent planned to not spend at all, 7 percent planned to spend as they did last year, and only 2 percent planned to spend more than last year.

The poll was conducted online with 2,400 responses, yet that 91 percent figure is a strong signal that consumers intend to keep their wallets closed. (Whether they'll actually act as they intend is, of course, another question altogether.)

Second, the banks. FDIC-insured commercial banks and savings and loan associations reported an aggregate profit of $14.5 billion in the third quarter of 2010, a $12.5 billion improvement compared with the $2 billion the industry earned in the third quarter of 2009. The recent figure was the fifth consecutive quarter that these earnings registered a year-over-year increase. It should be noted that the primary contributing factor in the improvement in quarterly earnings was not more revenue from products and services, but rather a reduction in provisions for loan losses.

Finally, the thrifts. OTS-supervised thrifts posted combined profits of $1.77 billion in the first quarter, up from $1.49 billion in the previous quarter and $1.24 billion in the third quarter of 2009. The recent figure marks the fifth consecutive profitable quarter. Again, there are a few points to note. The number of "problem" thrifts remains elevated; troubled assets increased slightly; and loan-loss provisions were up for the quarter.

Maybe those banks, savings and loan associations and thrifts can use some of their profits to hire some more people and put more a little more cheer in their employees' paychecks. That might help consumers make a come back as well in 2011.

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