THE BASIS POINT

FDIC: Modest But Steady Banking Recovery

The FDIC’s Quarterly Banking Profile for the fourth quarter of 2011 was released Tuesday, and shows a modest but steady recovery in the banking industry.

A majority of banks reported improved quarterly earnings, but 813 institutions remain on the “Problem Bank List” – 11% of all FDIC insured banks and savings associations.

In 2011 the industry had a net income of $119.5 billion, the highest earnings since 2006, and for the fourth quarter made a profit of over $26 billion.

But don’t pop the champagne cork yet: although this is the 10th consecutive quarter of earnings increases, virtually all of the earnings increase was the result of lower provisions for loan losses, as has been the case for the past nine quarters.

Loss provisions for the fourth quarter totaled $19.5 billion, down by 40% from $32.7 billion in the comparable quarter of last year.

The FDIC reported that about 19% of institutions reporting losses for the quarter, but 63% of banks reported an improvement in quarterly net from last year and return on assets (ROA) rose to 0.76% from 0.64%.

Of great interest in the FDIC report was the growth in loan portfolios. Lending increased by about $130 billion: $63 billion in commercial and industrial borrowing, $26 billion in residential loan balances, and about $21 billion in credit card lending.