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US banks report stronger profits and more lending

Published on NewsOK Modified: December 4, 2012 at 4:03 pm •  Published: December 4, 2012

In an interview with The Associated Press this week, Wells Fargo & Co. CEO John Stumpf said he expects the economy to remain tepid until customers and businesses better understand Washington's plans for tax policy, health care and other issues.

"I don't see the impetus to all of a sudden go from a 2 percent growth to a 5 percent growth," Stumpf said. "We don't have enough growth initiatives in place today to have a more aggressive and sustainable long-term recovery, and there's still too much uncertainty."

The Federal Reserve's policies have helped banks borrow cheaply for the past four years. The Fed has kept short-term interest rates near zero to try to spur the economy. And the Fed's bond purchases have led to lower long-term interest rates, which have helped drive a modest housing recovery and boost mortgage lending.

But banks complain that low interest rates have also reduced the money they can make on loans.

Mortgage lending itself has become a mixed bag for banks. The second-largest U.S. bank, Bank of America Corp., has said the new mortgages it made in the third quarter jumped 18 percent from a year earlier to $21 billion. But its mortgage division still lost money as it worked through problem mortgages issued before the financial crisis.

Mortgages still drive revenue for the banking industry. But banks are still paying a price for the risky mortgage lending of the past decade — in the form of lawsuits, foreclosures and regulatory restrictions.

And banks are struggling to navigate a landscape in which many of their old revenue streams, including certain fees on debit-card transactions or credit cards marketed to college students, have been clipped.

To make up for the loss of revenue in other areas, they have been trying to collect more revenue from fees. Last year, some banks tried to charge customers for using debit cards. That unleashed a backlash among consumers and helped fuel anti-Wall Street protests. The banks ultimately dropped these fees. But others have remained.

At the same time, some in Congress are calling for separating commercial and investment banking, which essentially would spur the dismantling of most of the biggest banks.


Rexrode reported from New York.