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.
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