WASHINGTON (AP) — U.S. banks earned less in the July-September quarter than they did a year earlier, marking their first year-over-year profit decline since the spring of 2009 when the country was still mired in the Great Recession.
The Federal Deposit Insurance Corp. said Tuesday that the banking industry earned $36 billion in the third quarter, down $1.5 billion or 3.9 percent from the third quarter of 2012.
The FDIC said the earnings decline came primarily from a $4 billion increase in litigation expenses at a single institution.
The FDIC did not name the institution, but the JPMorgan Chase & Co. reached a $4.5 billion settlement with investors earlier this month which was the latest in a series of legal settlements for the nation's largest bank over JPMorgan's sales of mortgage-backed securities in the year preceding the 2008 financial crisis.
As the housing market collapsed between 2006 and 2008, millions of homeowners defaulted on high-risk mortgages. That led to billions of dollars in losses for investors who bought securities created from bundles of mortgages. Those securities had been sold by JPMorgan and other big Wall Street banks.
The FDIC said that lower revenue from reduced mortgage activity and lower gains from asset sales also contributed to the reduction in earnings in the July-September quarter.
Half of the nation's 6,891 insured banking institutions had year-over-year growth in earnings while half reported declines, the FDIC said in its quarterly report on the health of the industry.