Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, December 16, 1993 TAG: 9312160036
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The nation's 11,081 banks earned $11.45 billion in the third quarter, up from $10.4 billion in the second quarter and the previous record of $10.8 billion in the first, the Federal Deposit Insurance Corp. said Wednesday.
For the first nine months of this year, bank profits already have surpassed the full-year record of $32.1 billion in 1993.
And regulators, bankers and analysts said the outlook for next year is almost as good.
"It's probably optimistic to think it will continue at the level we have . . . but clearly earnings are strong and . . . we see nothing that will change," said acting FDIC Chairman Andrew Hove.
He attributed the profits to the improving economy and to the wide gap between short-term interest rates on deposits and longer-term rates on loans and other bank investments.
The gap between banks' interest expenses and earnings was down for the third consecutive quarter, but at 4.45 percentage points, it was not far under the record 4.67 percentage points of the fourth quarter of 1992.
Hove said banks now were clearly in a position to increase their lending, but the report said loans to businesses declined for the 13th time in 14 quarters, hitting $530 billion, the lowest level in 10 years.
However, loans to consumers are increasing. And Hove and economist James Chessen of the American Bankers Association predicted commercial lending would start growing next year.
In the meantime, Chessen said, banks are increasing profits from nontraditional activities such as selling mutual funds and data processing services.
But Chris Lewis of the Consumer Federation of America said banks also were increasing their fees for traditional services such as checking accounts.
"That's boosting their bottom lines, but at the expense of consumers," he said.
The FDIC report listed several signs of an improving industry:
The number of "problem" banks fell to 496 with $281 billion in assets, down from 909 with $448 billion a year ago.
A standard measure of industry profitability, return on assets, hit a record 1.27 percent in the third quarter.
Banks' capital cushion rose to 7.95 percent, the largest in 30 years.
Troubled assets - past-due loans and foreclosed real estate - were at their lowest level, as a percentage of assets, since 1986.
Banks' reserves for future losses exceeded past-due loans for the first time in 12 years.
by CNB