U.S. banks report second best profits ever

U.S. banks reported net income of $34.7 billion in the fourth quarter of 2012, a 37% improvement from Q4 2011, finds the Federal Deposit Insurance Corporation (FDIC).

And for the full year, industry earnings totaled $141.3 billion, the second highest ever reported by the industry after the $145.2 billion earned in 2006.

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“The improving trend that began more than three years ago gained further ground in the fourth quarter,” says FDIC Chairman Martin J. Gruenberg. “Balances of troubled loans declined, earnings rose from a year ago, and more institutions of all sizes showed improved performance.”

Two-thirds of all institutions reported improvements in their quarterly net income from a year ago. Also, the share of institutions reporting net losses for the quarter fell to 14% from 20.2% a year earlier. The average return on assets (ROA), a basic yardstick of profitability, rose to 0.97% from 0.73% a year ago.

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Fourth quarter net operating revenue (net interest income plus total noninterest income) totaled $169 billion, an increase of 4.5% from a year earlier, as gains from loan sales rose by $2.4 billion and trading income increased by $1.9 billion.

Also among the findings:

Total loan balances increased. Loan balances posted their sixth quarterly increase in the last seven quarters, rising by $118.2 billion (1.6%).

“Growth in lending continues to be led by commercial and industrial loans,” says Gruenberg. “Insured institutions of all sizes increased their loan balances during the quarter.”

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The flow of money into deposit accounts increased sharply. Total deposits increased by a record $313.1 billion (3%) in the fourth quarter, surpassing the previous quarterly high of $308 billion set in the fourth quarter of 2008.

The number of institutions on the FDIC’s “Problem List” declined for a seventh consecutive quarter. This number fell from 694 to 651. During the recent financial crisis, problem banks reached a high of 888 at the end of the first quarter of 2011.

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Full-year net income improved for a third consecutive year. The increase in annual earnings over 2011 was attributable to lower expenses for loan-loss provisions and higher noninterest income.

The Deposit Insurance Fund (DIF) balance continued to increase. The audited DIF balance — the net worth of the fund — rose to $33.0 billion at December 31 from $25.2 billion at the end of September.