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Big earnings for banks

By David McMillin · Bankrate.com
Wednesday, December 5, 2012
Posted: 4 pm ET

As the holidays approach, it looks like the banking industry has a reason to be happy.

According to new numbers in the FDIC's Quarterly Banking Profile, banks earned $37.6 billion in the third quarter of 2012. If you've been keeping track of the progress since the financial crisis, those quarterly earnings are the highest in six years. In addition to more money, the report highlights additional positive signs. From a decline in the number of bank failures to an increase in the total value of loans and leases, the banking industry appears to be getting back on track.

However, the majority of the good news is thanks to a small segment of the industry: megabanks. Financial institutions with more than $10 billion in assets were responsible for approximately 82 percent of the industry's total earnings. There have been plenty of calls to break up too-big-to-fail institutions over the past year, but this percentage highlights a continued imbalance in the industry. Small banks are clamoring for their share of the market. While FDIC Chairman Martin J. Gruenberg pointed to an increase in small-business lending from those small institutions, those small banks are currently very concerned that credit unions will be able to expand their lending powers. 

Even with the dramatic lift in earnings for big banks, it's clear that challenges persist. This week, reports of massive layoffs at Citi have emerged.

How do you feel about the state of the financial industry? Do the increased earnings make you feel confident about your bank's safety?

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