Number of 'Problem' US Banks Continues to Rise

Wednesday, 23 Feb 2011 07:06 AM

 

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Federal regulators said Wednesday the number of banks on their confidential "problem" list increased by 24 in the final quarter of last year, even as the industry continued to heal with the recovering economy.

The Federal Deposit Insurance Corp. reported that banks earned $21.7 billion in the fourth quarter. That compared with a net loss of $1.8 billion a year earlier. The agency said bank earnings were buoyed in the latest quarter by reduced charges for soured loans.

The FDIC called 2010 a turnaround year for the banking industry, with net income reaching a three-year high of $87.5 billion. It contrasted with a loss of $10.6 billion in 2009.

The FDIC said the number of troubled banks rose to 884 in the quarter from 860 in the third quarter. That was the slowest rate of increase to the problem list since the first quarter of 2008.

Bank industry revenue remained fairly strong through the financial crisis that struck with force in 2008, FDIC Chairman Sheila Bair noted, but there is little "upward momentum."

"A key reason why revenues haven't grown faster is that loans have not been growing," Bair said at a news conference. "It's not going as at fast a pace as I would like to see."

Loan balances declined at a majority of U.S. banks in the fourth quarter, falling by $51.8 billion, or 0.4 percent, from the previous July-September period.

The FDIC's deposit insurance fund, which fell into the red in 2009, posted a slight improvement. Its deficit narrowed to $17.7 billion from $21.3 billion in the third quarter. Bair said the agency expects the balance to turn positive this year.

The spate of bank failures are expected to cost the insurance fund about $100 billion through 2013.

The FDIC is backed by the government, and deposits are guaranteed up to $250,000 per account. Also, the agency still has tens of billions in loss reserves apart from the insurance fund.

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