Number of troubled US banks declines
Source: Agencies |
August 24, 2011, Wednesday
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Print Edition
Print Edition
THE number of troubled banks tracked by US bank guarantee agency the Federal Deposit Insurance Corp fell in the second quarter of this year, the first quarterly drop in five years.
But growth in bank earnings slowed, a sign that the financial industry is feeling the effects of a weak economy.
The FDIC, set up by the US in 1933, said that in the second quarter it had 865 banks on its confidential list of banks considered to have low capital cushions against risk, roughly 11.5 percent of all federally insured banks.
That was down from 888 in the first quarter and the first decline since mid-2006.
The FDIC also said the US banking industry earned US$28.8 billion in the second quarter, up from US$20.9 billion in the same period last year, the eighth consecutive quarter earnings have risen over the previous year, but the smallest gain in the past seven quarters.
While the industry as a whole has continued to show signs of improvement, many banks are still struggling.
So far this year, 68 banks have failed, down from the 157 that closed last year - the worst year since 1992.
Most of the banks that have struggled or failed have been small or regional institutions that depend heavily on loans for commercial property and development - sectors that have suffered huge losses.
As companies have shut down during the recession, they have quit shopping malls and office buildings financed by those loans.
All the banks that have failed this year have been smaller banks.
But large banks are less profitable than they were before the financial crisis. As a result, many are cutting staff.
Bank of America said last week that it is cutting 3,500 jobs. This follows layoffs announced this summer at Goldman Sachs, Bank of New York Mellon, State Street and other financial institutions.
But growth in bank earnings slowed, a sign that the financial industry is feeling the effects of a weak economy.
The FDIC, set up by the US in 1933, said that in the second quarter it had 865 banks on its confidential list of banks considered to have low capital cushions against risk, roughly 11.5 percent of all federally insured banks.
That was down from 888 in the first quarter and the first decline since mid-2006.
The FDIC also said the US banking industry earned US$28.8 billion in the second quarter, up from US$20.9 billion in the same period last year, the eighth consecutive quarter earnings have risen over the previous year, but the smallest gain in the past seven quarters.
While the industry as a whole has continued to show signs of improvement, many banks are still struggling.
So far this year, 68 banks have failed, down from the 157 that closed last year - the worst year since 1992.
Most of the banks that have struggled or failed have been small or regional institutions that depend heavily on loans for commercial property and development - sectors that have suffered huge losses.
As companies have shut down during the recession, they have quit shopping malls and office buildings financed by those loans.
All the banks that have failed this year have been smaller banks.
But large banks are less profitable than they were before the financial crisis. As a result, many are cutting staff.
Bank of America said last week that it is cutting 3,500 jobs. This follows layoffs announced this summer at Goldman Sachs, Bank of New York Mellon, State Street and other financial institutions.
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