Tuesday, November 22, 2011

Industry Continues to Regain Strength in Face of Challenges

The FDIC released its Quarterly Banking Profile today, that highlighted the strength of the industry in light of difficult conditions.

“While economic difficulties remain, higher capital levels, increased liquidity and lower losses signal a positive trajectory as the banking industry continues to gain strength.”

Increased Business Lending

“Banks are aggressively seeking out borrowers with a strong capacity to repay loans. Slow economic growth and high levels of uncertainty are still restraining lending, but that tide is beginning to turn. Business lending was particularly strong, increasing 10 percent compared to the same period a year ago. This uptick signals increased optimism about the broader economy, as businesses become more willing to take on debt and consider expansion.”

Record Capital Ratios

“The industry continues to put loan loses behind it and plow earnings back into capital. Capital backs every loan made and record capital ratios demonstrate a firm foundation of financial health.
“Banks added over $24 billion in equity capital during the third quarter and $288 billion since 2008 when the financial crisis took hold. Total industry capital is almost $1.6 trillion. Banks also have set aside more than $197 billion in reserves to cover possible loan losses. Capital plus reserves gives a total buffer protecting the industry of almost $1.8 trillion. In addition, the industry’s capital-to-assets ratio – a key measure of financial strength – remains at an all-time high.”

Strong Bank Earnings

"You can't have a strong economy without having a strong, growing and profitable banking sector. The return to health is a critical first step toward rebuilding the economic vitality of the country."

Problem Banks and Loan Losses

“The considerable slowdown in bank failures and continuing decline in the number of troubled banks is a positive sign as our industry continues to regain its health. The FDIC is rebuilding reserves as the industry -- which is solely responsible for all the agency’s expenses -- paid about $14 billion in premiums over the last year.”

Read ABA's statement on FDIC's Quarterly Baning Profile.

Read the FDIC's Quarterly Banking Profile.

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