U.S. Bank Earnings Up 6.6%, Most in 6 Years

Bank of AmericaBy MARCY GORDON, AP Business Writer

WASHINGTON (AP) - U.S. banks earned more from July through September than in any other quarter over the past six years. The increase is further evidence that the industry is strengthening four years after the 2008 financial crisis.

The Federal Deposit Insurance Corp. said Tuesday that the banking industry earned $37.6 billion in the third quarter, up 6.6 percent from $35.3 billion in the third quarter of 2011.

About 57 percent of the banks reported improved earnings, which allowed them to set aside less for losses on loans. And the number of troubled banks fell to the lowest level in three years.

For the second straight quarter, loans to consumers increased in most categories, including home mortgages and auto loans. That suggests banks are becoming less cautious, which could help the broader economy. More lending leads to more consumer spending, which drives roughly 70 percent of economic activity.

Still, the increase in lending to consumers was "relatively modest" and regulators would like to see more of it, FDIC Chairman Martin Gruenberg said.

"This was another quarter of gradual but steady recovery," he said. "Overall the news is encouraging, but continuing downside economic risks remain."

Gruenberg said banks are worried about what will happen with the "fiscal cliff." That's the name for automatic tax increases and spending cuts that will kick in next month unless President Barack Obama and congressional lawmakers reach a deal by then to avert them

For the first time since 2009, the biggest contributor to the earnings was increased revenue rather than reductions in what banks set aside for loan losses, the FDIC said.

Revenue increased 3 percent in the third quarter from the same quarter a year ago, after showing sluggish growth in previous quarters. A large part of the increase came from sales of loans to other institutions. That shows continued weakness in other sources of revenue, such as interest on loans, Gruenberg said.

Banks with assets exceeding $10 billion drove the bulk of the earnings growth in the July-September period. While they make up just 1.5 percent of U.S. banks, they accounted for about 82 percent of the earnings.

Those banks include Bank of America Corp. (BAC), Citigroup Inc. (C), JPMorgan (JPM) and Wells Fargo & Co. (WFC). Most of them have recovered with help from federal bailout money and record-low borrowing rates.

The number of banks on the FDIC's confidential "problem" list fell in the third quarter to 694, or around 9.6 percent of all federally insured banks. That compares with 732 troubled banks in the second quarter.

So far this year, 50 banks have failed. That's far below the 92 banks that shuttered last year and the 157 that closed in 2010 - the most for one year since the height of the savings and loan crisis in 1992.

In the third quarter, the decline in bank failures allowed the insurance fund to strengthen. The fund turned from deficit to positive in the second quarter of 2011 and had a $25.2 billion balance as of Sept. 30, according to the FDIC. That compares with $22.7 billion at the end of June.

The FDIC is backed by the government, and its deposits are guaranteed up to $250,000 per account. Apart from its deposit insurance fund, the agency also has tens of billions in loss reserves.

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Well, if the rest of the US banks are hiding as much as Deutsche Bank hid from its shareholders ($12 billion in losses) I'm surprised their balance sheets only show them up 6.6%. Robert Khuzami, who was the bank's general counsel at the time, is now head of enforcement at the SEC. Anyone see the screenshot of Khuzami with Jaime Dimon? Dimon, the current chairman, president and CEO of JPMorgan Chase - was the spectre of the $9 billion trading loss for JPMC. And Warren Buffett thinks Dimon is the best choice to be next chariman of the FED. Anyone see a problem here?

December 07 2012 at 4:04 PM Report abuse rate up rate down Reply

6.6% ? My savings account earns 0.30%, Huf stop lying to the sheep. You must be held accountable for false propaganda.

December 05 2012 at 7:57 AM Report abuse +1 rate up rate down Reply

I wonder where their tax hike is? Oh I forget they get paid to run their business by the government. So much for the lie they were in deep financial trouble.

December 05 2012 at 5:59 AM Report abuse +1 rate up rate down Reply

I wonder where Uncle Ben Bernanke stashes his loot?

December 05 2012 at 1:47 AM Report abuse +1 rate up rate down Reply

Then why are interest rates so artificially low on CD s and other savings vehicles. Bankster Barons!

December 05 2012 at 12:37 AM Report abuse +1 rate up rate down Reply
1 reply to bcheerful3's comment

Thank Bernanke with his quanitative easing QE1 & 2 and very shorty, QE3. They have effectively destroyed the CD market.

December 05 2012 at 1:45 AM Report abuse rate up rate down Reply

It states, "U.S. Bank Earnings Up 6.6%, Most in 6 Years?" To bad that it's upon the backs of low and middle income Americans who can least afford it. Hope all those greedy bank CEO's have a Merry Christmas with their yearend bonus’s................

December 05 2012 at 12:19 AM Report abuse rate up rate down Reply
1 reply to barryaclarke's comment

I hope they eat poison and die.

December 05 2012 at 12:37 AM Report abuse rate up rate down Reply

How cool would it be if they started paying some interest on CDs and IRAs now? Last year, CD was 0.1%. While they're charging 6% or so on loans. Doesn't make me want to get a CD. IRA is a limit of 5000.00. That interest is $5. I gave myself a huge raise and instead of investing in an IRA, I'm putting $5 every month into a cookie jar. That is 12 x what an IRA would pay me. Nope, no investment here.

December 04 2012 at 9:42 PM Report abuse rate up rate down Reply

Could many of the new found profits be from 'Lay-offs'??????

December 04 2012 at 9:00 PM Report abuse rate up rate down Reply
1 reply to Dereck's comment

"For the first time since 2009, the biggest contributor to the earnings was increased revenue......."

Which word(s) don't you understand?

December 04 2012 at 10:23 PM Report abuse -3 rate up rate down Reply
Plummer, Joseph

try this, Where's the money that's supposed to be in Social Security ? Seems the Government forgot where and how it got there, namely, "Employee contributions with Employer contributions into what was intended to be a " retirement " fund for "those that put into it"... But you see, the Govenment just could not let that huge amount go year after year growing, so they decided to latch onto it and use it for what it was not intended. Social programs, housing, schools, etc. you name it, the Government dipped time and again into it, now get this, they even gave money from that fund to those that never put into it, that's right, So now, the Govenment is saying the fund is almost depleted, will guess what, I wish every existing American "Worker would file a joint lawsuit against the Federal Govenment for the return of the money they " stole ". WAy they could refund it, easy, stop Foreign Aid. put that money back into the Social Security, People, Social Security is not an Entitlement benefit. the govt wants you to think it is. this is not on Party lines, it's the whole dang Government.

December 04 2012 at 8:48 PM Report abuse rate up rate down Reply
2 replies to Plummer, Joseph's comment

Actually, I think it is an entitlement program. I have paid in for decades now and I feel I'm entitled to get some back when I retire.

December 04 2012 at 9:44 PM Report abuse rate up rate down Reply

You do realize that the Democrats want to preserve your "entitlement" and the Republicans want to abolish them. That has been their goal ever since SS was established.

By the way, nobody "stole" the money. It was put into treasury bonds, the same vehicle that people and governments all over the world trust to put their money in. The number one investors of government treasury bonds are US citizens.

December 06 2012 at 3:01 PM Report abuse +1 rate up rate down Reply

Maybe Banks should start loaning money so everyone benifits in the long run

December 04 2012 at 8:06 PM Report abuse rate up rate down Reply