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3Q bank thrift earnings drop sharply
WASHINGTON (11/26/08)—Third-quarter net income for federally insured banks and thrifts represents, with one exception, the lowest posted by the industry since the fourth quarter of 1990—down 94% from one year ago, according the Federal Deposit Insurance Corp. (FDIC). Only the fourth quarter of 2007 beat this year’s third quarter in dismal income results. The FDIC Tuesday reported net income for its insured institutions of $1.7 billion in the third quarter, a decline of $27.0 billion from the $28.7 billion the industry earned in the third quarter of 2007. The agency also reported that the number of banks on the problem list soared as of Sept. 30 stood to 171, and their combined asset value was $116 billion. This compared to 117 banks on the list the previous quarter, according to Reuters Tuesday, and is the highest since 1995 when there were 193 banks identified as problem institutions. "We've had profound problems in our financial markets that are taking a rising toll on the real economy,” said FDIC Chairman Sheila Bair when she announced the bank and thrift figures. “Today's report reflects these challenges." In releasing the latest results, the FDIC cited higher provisions for loan losses as the primary reason for the drop in industry profits. In addition to the increased provision expenses, the industry reported $7.6 billion in losses on sales of securities and other assets in the third quarter, compared to $77 million in gains a year earlier. The FDIC also said its industry-funded reserve, which backs deposits, dipped to $34.6 billion by the end of September, down 23.5% from almost $43 billion the previous quarter.
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