WASHINGTON (AP) — U.S. banks’ earnings rose 17 percent in
the October-December quarter from a year earlier, as losses on loans
fell to a seven-year low and banks set aside less to cover losses as
well as legal costs.
The data provides fresh evidence of the
banking industry’s sustained recovery more than five years after the
financial crisis struck.
Still, the government says banks continue to
have difficulty increasing revenues, and are relying on setting aside
less for loan losses to boost earnings.
The Federal Deposit
Insurance Corp. reported Wednesday that the banking industry earned
$40.3 billion in the final quarter of 2013, up from $34.4 billion in the
same period in 2012.
For all of 2013, bank earnings increased 9.6
percent to what the agency calls a record annual level of $154.7
billion. It exceeded the previous record earnings of $145.2 billion in
2006.
The number of banks on the FDIC’s "problem" list fell to 467 in the final quarter of 2013 from
515 in the third quarter.
Banks’
losses on loans dropped 36.7 percent to $11.7 billion, the lowest level
for a fourth quarter since 2006, the FDIC said. The largest decline
came in home mortgages, which posted a 57.7 percent drop in losses.
FDIC
Chairman Martin Gruenberg said the latest results showed "a
continuation of the recovery in the banking industry." At the same time,
he said, the industry still faces challenges including only modest
growth in lending, narrow profit margins and a decline in mortgage
refinancing business as long-term interest rates have risen.
Banks
with assets exceeding $10 billion drove the bulk of the earnings growth
in the October-December period. While they make up just 1.5 percent of
U.S. banks, they accounted for about 82 percent of industry earnings.
Those
banks include Bank of America Corp., Citigroup Inc., JPMorgan Chase
& Co. and Wells Fargo & Co. Most of them have recovered with
help from federal bailout money during the financial crisis and
record-low borrowing rates.
Last year, the number of bank failures
slowed to 24, still more than normal. In a strong economy, an average
of four or five banks close annually. But failures were down sharply
from 51 in 2012, 92 in 2011 and 157 in 2010 — the most in one year since
the height of the savings and loan crisis in 1992.
In the fourth
quarter, the decline in bank failures allowed the deposit insurance fund
to continue to strengthen. The fund, which turned from deficit to
positive in the second quarter of 2011, had a $47.2 billion balance as
of Dec. 31, according to the FDIC.
That compares with $40.7 billion at
the end of September.
The FDIC, created during the Great
Depression to ensure bank deposits, monitors and examines the financial
condition of U.S. banks.
The agency guarantees bank deposits up to
$250,000 per account. Apart from its deposit insurance fund, the FDIC
also has tens of billions of dollars in reserves.
Copyright 2014 The Associated Press. All rights
reserved. This material may not be published, broadcast, rewritten or
redistributed.