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US 4Q bank earnings up 37 pct as lending rises

Published on NewsOK Modified: February 26, 2013 at 12:39 pm •  Published: February 26, 2013

Gruenberg noted that banks' profit from interest they charge has been eroded by historically low interest rates during the economic recovery. Banks' net interest income fell to $104.4 billion in the fourth quarter from $107.1 billion a year earlier. That was the lowest quarterly level since the final three months of 2009, the FDIC said.

The decline in interest income has made banks increasingly reliant on the fees they charge.

For the sixth time in seven quarters, banks' lending increased. It rose by 1.7 percent in the fourth quarter, led by growth in commercial and industrial loans, and credit cards. That shows banks are becoming less cautious, which could help the economy. More lending leads to more consumer spending, which drives roughly 70 percent of economic activity.

Home equity loans fell by 2.2 percent, however.

So far this year, three banks have failed. That follows 51 closures last year, 92 in 2011 and 157 in 2010. The 2010 closures were the most in one year since the height of the savings and loan crisis in 1992.

In the fourth quarter, the decline in bank failures allowed the insurance fund to continue to strengthen. The fund, which turned from deficit to positive in the second quarter of 2011, had a $32.9 billion balance as of Dec. 31, according to the FDIC. That compares with $25.2 billion at the end of September.

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