U.S. Commercial Banks Report Higher Earnings
August 30 2016 - 11:10AM
Dow Jones News
WASHINGTON—The nation's commercial banks and savings
institutions reported a 1.4% rise in net income in the second
quarter compared with a year earlier, as fewer large banks set
aside money for litigation expenses.
Net income at the 6,058 banks insured by the Federal Deposit
Insurance Corp. rose $584 million to $43.6 billion in the second
quarter from $43 billion a year earlier, according to data released
Tuesday by the FDIC.
"Income and revenue both increased from a year ago, loan growth
remained strong, the number of unprofitable banks was at an 18-year
low, and there were fewer banks on the problem list," said FDIC
Chairman Martin Gruenberg, noting continued improvement by
community banks.
The rise in net income was due in part to a $5.2 billion
increase in net interest income and a $981 million decline in
expenses for litigation put aside at a few large banks. Banks also
increased their loan-loss provisions by 44% to $3.6 billion from a
year earlier, driven in part by rising levels of troubled loans to
commercial and industrial borrowers in the energy sector.
Similar to the previous quarter, Mr. Gruenberg said the full
impact of low energy prices remains to be seen.
In the quarter, the number of loan payments by commercial and
industrial borrowers that were past due rose 8.9%, to $2.1 billion,
as low energy prices continued to challenge oil and gas
producers.
"Banks are still operating in a challenging environment," said
Mr. Gruenberg. "Net interest margins and return on assets remained
low by historical standards, noncurrent commercial and industrial
loans increased, and loan charge-offs rose for a third consecutive
quarter."
Community banks, which account for 5,602 of the insured
institutions, fared better than the industry overall, reporting
$22.8 billion in net operating income in the quarter, up 7.1% from
the second quarter of 2015.
The number of financial institutions on the FDIC's "problem
list" shrank to 147, the lowest in more than seven years. Two banks
failed during the second quarter.
Separately, the FDIC disclosed that its insurance fund reserve
ratio—the fund balance as a percent of estimated insured
deposits—rose to 1.17%, the highest ratio in more than eight
years.
Write to Donna Borak at donna.borak@wsj.com
(END) Dow Jones Newswires
August 30, 2016 10:55 ET (14:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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