Friday, January 10, 2014
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ABA Comments on FDIC Bank Earnings Report
By James Chessen, ABA Chief Economist
“The banking industry’s performance continues to improve significantly. Increases in business lending, strong capital levels and a reduction in problem loans speak to an industry that’s gaining strength. Challenges remain, including the daunting fiscal decisions ahead for both the United States and Europe. The manner in which these issues are resolved will have a significant impact on our country’s pace of economic growth. The banking industry has worked hard to fortify itself for these and other challenges that lay ahead.”
Business Loans Grow for Eighth Consecutive Quarter
“Banks continue to aggressively seek out business loans, and our industry’s double-digit lending growth over the last year is a testament to those efforts. The industry’s business lending increased by 15.1 percent year-over-year. Unfortunately, the atmosphere has started to change. Our business customers are telling us that they are hesitant to expand or take on more debt in today’s uncertain environment. In addition, the housing sector continues to be a drag on total lending volume, and will limit loan growth to a gradual pace for the foreseeable future.”
Bank Earnings Grow Despite Challenges
"Strong business loan growth and aggressive cost controls are helping banks maintain earnings despite a challenging economic environment. At the same time, knowledge that interest rates will remain low for years means businesses feel no urgency to borrow. Ultimately, the pace of the economy will determine whether businesses decide to expand operations and how quickly banks’ core lending business will return.”
Problem Loans Fall, Failures Continue to Decline
“The industry’s asset quality continues to improve, with problem loans falling to levels not seen since the first quarter of 2009. The number of problem banks fell to the lowest level in ten quarters, and bank failures continue to fall dramatically. Banks, not taxpayers, are solely responsible for all of the FDIC’s expenses, paying about $13.5 billion in premiums over the last year.”
Capital Continues to Grow
“The industry’s capital ratios are at or near record levels, a strong foundation that provides an important buffer for any economic circumstances or challenges that could arise. Banks have added almost $316 billion in capital since 2008 when the financial crisis took hold. Total industry capital is now almost $1.6 trillion. Banks also have set aside more than $176 billion in reserves to cover possible loan losses. Capital plus reserves gives a total buffer protecting the industry of more than $1.78 trillion.”
ABA Comments on FDIC Bank Earnings Report
“The banking industry’s performance continues to improve significantly. Increases in business lending, strong capital levels and a reduction in problem loans speak to an industry that’s gaining strength. Challenges remain, including the daunting fiscal decisions ahead for both the United States and Europe. The manner in which these issues are resolved will have a significant impact on our country’s pace of economic growth. The banking industry has worked hard to fortify itself for these and other challenges that lay ahead.”
Business Loans Grow for Eighth Consecutive Quarter
“Banks continue to aggressively seek out business loans, and our industry’s double-digit lending growth over the last year is a testament to those efforts. The industry’s business lending increased by 15.1 percent year-over-year. Unfortunately, the atmosphere has started to change. Our business customers are telling us that they are hesitant to expand or take on more debt in today’s uncertain environment. In addition, the housing sector continues to be a drag on total lending volume, and will limit loan growth to a gradual pace for the foreseeable future.”
Bank Earnings Grow Despite Challenges
"Strong business loan growth and aggressive cost controls are helping banks maintain earnings despite a challenging economic environment. At the same time, knowledge that interest rates will remain low for years means businesses feel no urgency to borrow. Ultimately, the pace of the economy will determine whether businesses decide to expand operations and how quickly banks’ core lending business will return.”
Problem Loans Fall, Failures Continue to Decline
“The industry’s asset quality continues to improve, with problem loans falling to levels not seen since the first quarter of 2009. The number of problem banks fell to the lowest level in ten quarters, and bank failures continue to fall dramatically. Banks, not taxpayers, are solely responsible for all of the FDIC’s expenses, paying about $13.5 billion in premiums over the last year.”
Capital Continues to Grow
“The industry’s capital ratios are at or near record levels, a strong foundation that provides an important buffer for any economic circumstances or challenges that could arise. Banks have added almost $316 billion in capital since 2008 when the financial crisis took hold. Total industry capital is now almost $1.6 trillion. Banks also have set aside more than $176 billion in reserves to cover possible loan losses. Capital plus reserves gives a total buffer protecting the industry of more than $1.78 trillion.”