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More profit for banks

By Marcie Geffner · Bankrate.com
Wednesday, June 12, 2013
Posted: 3 pm ET

Banks and thrifts whose deposits are insured by the Federal Deposit Insurance Corp., reported their 15th consecutive quarter of year-over-year earnings growth in the first quarter of 2013.

In total, FDIC-insured financial institutions posted a net income of $40.3 billion in the quarter, an increase of $5.5 billion, or 15.8 percent, compared with the $34.8 billion in profits the industry reported in the first quarter of 2012.

Half of the 7,019 FDIC-insured institutions that reported financial results achieved year-over-year earnings increases. The proportion that was unprofitable dropped to 8.4 percent, compared with 10.6 percent a year earlier.

Profits grew in part because charge offs of uncollectible loans dropped to $16 billion in the first quarter of 2013, a decline of $5.8 billion, or 26.7 percent, compared with the first quarter of the prior year. The percentage of loans and leases that were noncurrent during the 2013 first quarter declined to the lowest level since 2008.

In a statement, FDIC Chairman Martin J. Gruenberg said the report showed further progress in the recovery of the banking industry.

The expiration of temporarily unlimited deposit insurance for non-interest-bearing transaction accounts at the end of 2012 didn't lead to large deposit outflows as some had predicted. Instead, total deposits increased 0.02 percent to $1.8 billion.

The number of so-called problem banks continued to decline, dropping from 651 to 612 during the quarter. Four FDIC-insured institutions failed, the smallest number since the second quarter of 2008, when two institutions were closed. Bank failures have numbered 13 so far this year, compared with 24 during the same period last year.

In a separate statement, James Chessen, chief economist at the American Bankers Association, a Washington, D.C., trade group that represents banks, said banks performed strongly in the first quarter due to aggressive cost controls.

"At the same time, top line revenue growth continues to be a struggle as businesses delay borrowing due to concerns about rising health care costs, tax increases and the pace of our economic recovery. Until the fog of uncertainty dissipates, rapid loan growth is unrealistic," Chessen said.

Follow me on Twitter: @marciegeff.

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