Saturday, May 31, 2008

FDIC Comments About Q1 2008 Bank Earnings and Loss Reserves

Earnings are down and the provision for losses are up for banks in Q1 2008 according to the FDIC. From the Market Watch:

The real estate sector was a major drag on banks in the first quarter, the Federal Deposit Insurance Corporation said Thursday, as falling asset quality of real estate loan portfolios pulled earnings down substantially.

Earnings for the quarter totaled just $19.3 billion compared to $35.6 billion a year ago, a decline of 46%, the FDIC said in its first-quarter banking profile.

"Higher loss provisions were the primary reason," the agency's report said.

Commercial banks and savings institutions insured by the FDIC set aside $37.1 billion in loan-loss provisions in the first quarter, more than four times the $9.2 billion set aside in the first quarter of 2007.

Just over half of banks reported one-year declines in quarterly earnings, the report said.
But big banks took the brunt of the earnings decline. Almost two out of three institutions with more than $10 billion in assets reported lower net income in the first quarter, the FDIC said.

Four big banks accounted for more than half of the earnings decline.

Restatements shrank fourth-quarter profits down to $646 million, from a previously reported $5.8 billion.

It was the lowest quarterly net income for the banking industry since the fourth quarter of 1990, the FDIC said.

Meanwhile, the agency said, the number of banks on its "problem list" rose to 90 from 76.
It marked the sixth straight quarter that the number of problem institutions has risen.
Total bank assets grew by 2.6% in the first quarter, even as loan growth slowed. Almost half the banks that pay dividends cut them, the FDIC said.

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