- John Podesta eats crow: ‘I apologize to Speaker Boehner’
- U.S., China race to finish line on ‘invisibility cloak’
- Obama ‘cavalier’ in hiding foreign aid order, judge rules
- Prince Charles: Muslims are driving Christians from Mideast through persecution
- Gitmo’s first commander: Close the prison down
- Google’s newest photography find: Just wink and shoot
- Detroit’s Heidelberg art project hit by 8 fires in 8 months
- Pa. police pull people over for random DNA tests for feds
- NASA pushing hard to get back into space game
- Harvard student to face federal charges for bomb hoax
Fewer U.S. banks failing as industry strengthens
Question of the Day
WASHINGTON (AP) — U.S. banks are ending the year with their best profits since 2006 and fewer failures than at any time since the financial crisis struck in 2008. They’re helping support an economy slowed by high unemployment, flat pay, sluggish manufacturing and anxious consumers.
As the economy heals from the worst financial crisis since the Great Depression, more people and businesses are taking out — and repaying — loans.
And for the first time since 2009, banks’ earnings growth is being driven by higher revenue — a healthy trend. Banks had previously managed to boost earnings by putting aside less money for possible losses.
Signs of the industry’s gains:
— Banks are earning more. In the July-September quarter, the industry’s earnings reached $37.6 billion, up from $35.3 billion a year earlier. It was the best showing since the July-September quarter of 2006, long before the financial meltdown. By contrast, at the depth of the Great Recession in the last quarter of 2008, the industry lost $32 billion.
— Banks are lending a bit more freely. The value of loans to consumers rose 3.2 percent in the 12 months that ended Sept. 30 compared with the previous 12 months, according to data from the Federal Deposit Insurance Corp. More lending fuels more consumer spending, which drives about 70 percent of economic activity. At the same time, overall lending remains well below levels considered healthy over the long run.
— Fewer banks are considered at risk of failure. In July through September, the number of banks on the FDIC’s confidential “problem list” fell for a sixth straight quarter. These banks numbered 694 as of Sept. 30 — about 9.6 percent of all federally insured banks. At its peak in the first quarter of 2011, the number of troubled banks was 888, or 11.7 percent of all federally insured institutions.
— Bank failures have declined. In 2009, 140 failed. In 2010, more banks failed — 157 — than in any year since the savings and loan crisis of the early 1990s. In 2011, regulators closed 92. This year, the number of failures has trickled to 51. That’s still more than normal. In a strong economy, an average of only four or five banks close annually. But the sharply reduced pace of closings shows sustained improvement.
— Less threat of loan losses. The money banks had to set aside for possible losses fell 15 percent in the July-September quarter from a year earlier. Loan portfolios have strengthened as more customers have repaid on time. Losses have fallen for nine straight quarters. And the proportion of loans with payments overdue by 90 days or more has dropped for 10 straight quarters.
The biggest boost for banks is the gradually strengthening economy. Employers added nearly 1.7 million jobs in the first 11 months of 2012. More people employed mean more people and businesses can repay loans. And after better-than-expected economic news last week, some analysts said the economy could end up growing faster in the October-December quarter — and next year — than previously thought.
That assumes Congress and the White House can strike a budget deal to avert the “fiscal cliff” — the steep tax increases and spending cuts that are set to kick in Jan. 1. If they don’t reach a deal, those measures would significantly weaken the economy.
Banks have also been bolstered by higher capital, their cushion against risk. Banks boosted capital 3.8 percent in the third quarter, FDIC data show. And the industry’s average ratio of capital to assets reached a record high.
On the other hand, many banks are no longer benefiting from record-low interest rates. They still pay almost nothing to depositors and on money borrowed from other banks or the government. But steadily lower rates on loans other than credit cards have reduced how much banks earn.
“This interest-rate pressure on the banks becomes very difficult to overcome,” says Fred Cannon, chief equity strategist and director of research at Keefe, Bruyette & Woods. “It’s a big headwind for banks.”
By Andrew P. Napolitano
Fourth Amendment says Obama is not at liberty to collect metadata
- U.S. Army mulls wiping out memory of Robert E. Lee, 'Stonewall' Jackson
- Half of America strips religion from Christmas
- Gov't wasted $30 billion on 'pillownauts,' crystal goblets -- buying human urine!
- BOLTON: Nero in the White House
- 'Duck Dynasty' star Phil Robertson: Gays 'wont inherit the kingdom of God'
- Army to cut up to 4,000 captains and majors
- U.S. pilot scares off Iranians with 'Top Gun'-worthy stunt: 'You really ought to go home'
- Pa. police pull people over for random DNA tests for feds
- Senators in rush to pass budget vow to undo cut to military retirement pay
- Prevention of school massacre shoots down arguments for Colorado gun control laws
Independent voices from the The Washington Times Communities
Covering the world of soccer, including the World Cup, Major League Soccer, D.C. United and the English Premier League and other interesting sporting events.
Lists of top ten movies, songs, funny moments, fashion statements, automobiles, children's names, stupid celebrity moments, first dates, last dates, weddings, and much, much more.
Right-brain investing in a left-brain world. You can do it. I can help.
News and views on the Civil War.
Top 10 handguns in the U.S.
Extraordinary day at Redskins Park
White House pets gone wild!
Let it snow