Bank profits up; problems still growing

Bank earnings hit their highest level since the third quarter of 2007, the FDIC says. Bank failures are rising but should level out.

By Charley Blaine Aug 31, 2010 5:10PM
The  banking sector posted a record profit in the second quarter even as the number of troubled banks continued to rise.

The Federal Deposit Insurance Corp.'s quarterly report card, released today, showed the list of "problem banks" reached 829 in the second quarter, an increase of 54 lenders, many of which were small community banks. 

While that is a smaller increase than in previous quarters, the number of problem banks remains at its highest level in more than 16 years.

Not all of those banks will founder, but officials said they expected the number of failures to peak later this year. So far this year, 118 banks have failed, with 45 closing in the second quarter.

Even so, bank earnings continue to rebound. The banking industry posted a $21.6 billion profit in the second quarter as loan losses stabilized, the FDIC said.

That profit was nearly five times as large as the $4.4 billion a year ago, and it was the industry’s best results since the credit card crisis began in the third quarter in 2007, The New York Times said.

Banks are also setting aside less money to cover future losses than they were before and taking advantage of ultra-low interest rates to improve lending margins.

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