June 1, 2007
Best not good enough
By Cory Hopkins
Federal Deposit Insurance Corp.-insured banks and savings institutions posted the fourth-highest quarterly net income in their history last quarter, but it still represents a loss compared to last year at the same time.
FDIC institutions reported net income of $36 billion in the first quarter, down from $36.9 billion at the same time last year, according to the FDIC's Quarterly Banking Profile, released yesterday.
The housing slump, unfavorable interest rate conditions, slow economic growth and a high incidence of "problem loans" were the main reasons for the diminished earnings, the FDIC said.
"It is clear that the operating environment is more challenging now than it has been in recent years," said Sheila C. Blair, FDIC chairman. "Key indicators of industry health - capital, earnings and asset quality - remain very strong by historical standards. However, curret conditions underscore the importance of banks remaining vigilant and following sound risk-management practices, especially for lending."
The report said the biggest threat to first quarter earnings was posed by higher expenses for credit losses at large banks and narrower net interest margins at smaller institutions.
At small instututions, those with less than $1 billion in total assets, net interest margins fell to 3.91 percent, the lowest in 16 years, according to the report.
Only 48 perecent of insured banks and thrifts reported higher earnings in the first quarter of this year compared to last year, the lowest percentage of institutions with earnings gains since 1994.
FDIC institutions reported net income of $36 billion in the first quarter, down from $36.9 billion at the same time last year, according to the FDIC's Quarterly Banking Profile, released yesterday.
The housing slump, unfavorable interest rate conditions, slow economic growth and a high incidence of "problem loans" were the main reasons for the diminished earnings, the FDIC said.
"It is clear that the operating environment is more challenging now than it has been in recent years," said Sheila C. Blair, FDIC chairman. "Key indicators of industry health - capital, earnings and asset quality - remain very strong by historical standards. However, curret conditions underscore the importance of banks remaining vigilant and following sound risk-management practices, especially for lending."
The report said the biggest threat to first quarter earnings was posed by higher expenses for credit losses at large banks and narrower net interest margins at smaller institutions.
At small instututions, those with less than $1 billion in total assets, net interest margins fell to 3.91 percent, the lowest in 16 years, according to the report.
Only 48 perecent of insured banks and thrifts reported higher earnings in the first quarter of this year compared to last year, the lowest percentage of institutions with earnings gains since 1994.
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