I’ve recently addressed the increases in revenue and new accounts for the credit union industry. This piece will address similar increases in the banking industry. This information was provided by commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC). Overall the banking industry is in recovery mode and has increased in income, revenue and loan balances. Charge-offs and loan losses have decreased.
The banking industry reported aggregate net income of $34.5 billion in the second quarter of 2012, compared to $28. 5 billion in second quarter 2011 or a $5.9 billion increase. This was the 12th quarter in a row with a year-over-year increase.
63 percent of all financial institutions reported improvements in quarterly net income from a year ago.
11 percent of the institutions reported net losses for second quarter 2012, compared to 15.7 percent a year earlier.
Average return on assets (ROA), a basic yardstick of profitability, was 0.99 percent in second quarter 2012 compared to 0.85 percent a year ago.
Second-quarter loss provisions totaled $14.2 billion, more than 26 percent less than the $19.2 billion that insured institutions set aside for losses in the second quarter of 2011.
Net operating revenue (net interest income plus total noninterest income) totaled $165.4 billion, an increase of $1.3 billion (0.8 percent) from a year earlier, as gains from loan sales rose by $3.0 billion.
Loans charged-off totaled $20.5 billion in second quarter 2012, compared to $28.9 billion or 29 percent a year earlier.
Loan balances increased by $102 billion or 1.4 percent, which was the fourth quarterly increase in the last five quarters.
Loans to commercial and industrial borrowers increased by $48.9 billion (3.6 percent).
Residential mortgages increased by $16.6 billion (0.9 percent) and credit card balances grew by $14.7 billion (2.3 percent).
Two areas that declined were: (1) real estate construction and development loan balances decreased by $10.9 billion or 4.8 percent, and (2) home equity line of credit declined by $10.21 billion or 1.7 percent.
Total deposits growth slowed. It increased by $61.6 billion in the second quarter 2012, increased $74.7 billion in the first quarter 2012, and grew by $186 billion in the fourth quarter of 2011.
The number of “problem” institutions declined from 772 in second quarter 2012 to 732 in first quarter 2012, which was the smallest number since year-end 2009.
Fifteen insured institutions failed during the second quarter 2012, which was the smallest number of failures in any quarter since fourth quarter of 2008.
“The banking industry continued to make gradual but steady progress toward recovery in the second quarter,” FDIC Acting Chairman Martin J. Gruenberg said. “Levels of troubled assets and troubled institutions remain high, but they are continuing to improve. After declining in the first quarter, loan balances once again expanded in the second quarter—extending a positive trend that began in 2011. Most institutions are profitable and are improving their profitability. All of these trends are consistent with the moderate pace of economic growth that has occurred over the past year.”
This shows that consumers are depositing money into banks and the banks are approving more loans. The real estate market hasn’t recovered. Residential mortgages rose slightly by 0.9 percent, real estate construction and development loans decreased along with home equity lines of credit.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.