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US banks earn $34.5 billion

By David McMillin ·
Saturday, September 1, 2012
Posted: 6 am ET

The Federal Deposit Insurance Corp. released its quarterly report on the health of the banking industry this week, highlighting that banks collectively earned a net income of $34.5 billion last quarter. In a year-over-year comparison, the banking industry's income increased by almost $6 billion.

Despite recent reports of trading losses, money laundering and interest-rate fixing, the report indicates that account holders have plenty of reasons to be confident in the ability of U.S. banks to remain profitable. Here's a look at four key indicators.

  • The FDIC's confidential list of "problem" banks decreased.
  • Fifteen banks failed in the second quarter, which is the lowest number of quarterly bank failures since the end of 2008.
  • The Deposit Insurance Fund balance increased by more than $7 billion.
  • Loan balances increased by $102 billion

Regarding the net income figure, my blogging colleague Claes Bell brought up a great piece of information. Bank income is back to where it was before the subprime mortgage crisis caused the housing market to topple over. In 2005, the banking industry earned a total second quarterly income of $34.6 billion, which was a record high at the time.

We've heard plenty of reports of banks struggling to adjust their business models to comply with new regulations. However, the recent earnings figures point to a banking industry that is alive and well, and making plenty of money.

In a press conference, FDIC Acting Chairman Martin Greunberg pointed out that the industry's profits actually could have been much higher, too. The chairman acknowledged that the massive $4 billion trading loss at JPMorgan was a significant weight on the industry's numbers as a whole. While many of the numbers in the report should give consumers confidence in the banking system, this brings "too big to fail" back into the spotlight. Should we be concerned that one institution can have such a big impact on the entire industry?

What do you think of the report? Does it make you more confident in the banking system?

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September 02, 2012 at 10:24 am

Borrow from the Fed @0.25%. Pay consumers virtually 0%. Loan money on credit cards at 13%-39%. Loan money on cars at 4% to 20%. Even if you only break even on the "casino business", how can you lose money? Most mortgages are not owned by banks; they are merely servicers.