Profits at major banks and savings and loans dropped nearly 25 percent in the third quarter to $28.7 billion, driven down by increases in provisions for loan losses and a decline in noninterest income, according to a report today from the Federal Deposit Insurance Corp.
The FDIC reported that the last time banks earned less than $30 billion was the first quarter of 2003. The amount of noncurrent loans and leases – defined as 90 days or more past due – rose by $16.6 billion, or nearly 24 percent. Noncurrent loans and leases totaled $83 billion, the highest level since 1992. More than half the increase in the quarter was made up of noncurrent loans secured by residential real estate. The value of noncurrent residential mortgage loans increased by $7.5 billion while the value of noncurrent home equity lines of credit rose by $783 million.
FDIC-insured institutions set aside $16.6 billion in loan-loss provisions in the third quarter, the most since the second quarter of 1987, and the second highest provision ever. Loss provisions in the quarter were more than 120 percent higher than in the third quarter a year ago. Noninterest income totaled $3.2 billion, down 5 percent from a year ago.
On the bright side was the record growth in commercial and industrial loans, rising by $89.5 billion, or nearly 7 percent, easily besting the previous record quarterly growth of $51.2 billion set in the second quarter this year. Total deposits at the financial institutions increased by $146 billion or 1.8 percent. The FDIC compiles its report from filings from the 8,560 banks and savings institutions that it insures.
The complete Quarterly Banking Profile is available at http://www2.fdic.gov/qbp/index.asp