Here at Christmas season, there is scantly-noted news happy enough to cheer the heart of any curmudgeonly Scrooge: The banking industry is growing more healthy after weathering the financial crisis.
Simply put, deposits are up, loan losses are falling, and loans in selected categories are on the grow.
The good news came in the Federal Deposit Insurance Corporation’s recently-released Quarterly Banking Profile.
“This was another quarter of gradual but steady recovery for FDIC-insured institutions,” FDIC Chairman Martin J. Gruenberg said when the report was issued earlier this month. “Signs of progress were evident in a number of indicators, such as loan growth, asset quality and profitability.”
Third quarter net income for FDIC-insured commercial banks and savings institutions rose to $37.6 billion in the third quarter of 2012, from $23 billion in the third quarter of 2011. At the same time, bank failures fell to 12 during the quarter – the lowest since the fourth quarter of 2008.
It was the 13th consecutive quarter of year-over-year increases for banks insured by the FDIC, created in 1933 to restore public confidence in a banking system that was shaken to its roots by the Great Depression.
The agency’s “Problem List” of banks fell for the sixth straight quarter, from 732 to 694. For the first time in three years, the list included fewer than 700 banks.
And the number of institutions with net losses fell from 14.6 percent to 10.5 percent. Overall return on assets rose from 1.03 percent to 1.06 percent. Third-quarter loan loss provisions declined from $18.1 billion to $14.8 billion
More good news: Charge-offs from noncollectable debts fell by 16.5 percent, to $4.4 billion. In loan categories, money going to commercial and industrial borrowers rose by $31.8 billion, and residential mortgages increased by $14.5 billion. Auto loans grew by $7.4 billion.
However, there is still room for progress: Home equity lines of credit fell by $12.9 billion, and real estate development and construction loans decreased by $6.9 billion. Overall, though, Gruenberg said the banking industry finished the last quarter in better shape, from Wall Street to Main Street.
“More than 55 percent of all banks reported loan growth,” he said. “Small banks are also increasing their lending, including their loans to small businesses.”
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James Welsh is a veteran journalist and financial writer covering compliance and securities fraud issues.
About James Welsh
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