FDIC predicts more trouble for US banks
The US banking sector saw its profits nosedive by 86 per cent in the second quarter as the number of banks in crisis reached new heights, the Federal Deposit Insurance Corporation said yesterday.
Ongoing deterioration in the housing and credit markets saw federally-insured banks earn just $5bn (£2.5bn) in the second quarter, compared with $36.8bn the previous year. And US banks also set aside a record $50.2bn in provisions to offset losses on mortgages and other loans.
The FDIC said that 117 banks and savings institutions were now considered to be under threat, compared with 90 in the preceding quarter. The total number of banks in trouble has now reached its highest point since the middle of 2003.
In a statement, FDIC chairman Sheila Blair said: “By any yardstick it was another rough quarter for bank earnings,” blaming the problems on the housing slump, poor economic conditions and the credit crisis.
The failure of IndyMac Bank in July added $32bn to the total assets of endangered banks, bringing the figure to $78bn, the FDIC said.
And troubled assets – loans that are more than 90 days overdue – rose by $26.7bn, pushing the percentage of total loans that are troubled to more than 2.04 per cent, the first time since 1993 that the figure has broken two per cent.
Nine banks insured by the FDIC have failed so far this year, with the Columbian Bank and Trust of Kansas the latest to fall by the wayside.
That represents a huge increase on last year when just three banks failed, and agency officials said more were likely to fold next year.