WASHINGTON – Profits at U.S. commercial banks and savings institutions climbed to a record high in the first quarter, bank regulators said last week.
Earnings rose 14.1 percent to $37.3 billion from $32.7 billion in the fourth quarter and were up 9.5 percent from $34 billon in the first quarter of 2005, the Federal Deposit Insurance Corp. said.
Fourth-quarter results were revised downward from an original $32.9 billion.
The FDIC, which oversees 8,800 financial institutions and insures deposits, said loan growth remained robust, particularly in commercial lending.
Asset quality remained historically strong, with net charge-offs declining after two quarters of increases related to a tougher bankruptcy law that took effect in October.
Loans associated with real estate construction and land development jumped 7.7 percent from the fourth quarter, to $34.5 billion, and were 34.6 percent higher than a year ago.
The FDIC nevertheless said rising short-term interest rates have put downward pressure on profits derived from loans.
A healthy economy has kept loan losses below historical norms, but the convergence of long-and short-term interest rates has made it harder for banks to charge enough on long-term loans to offset their own rising borrowing costs.
The record earnings report drew an attack from credit unions, which questioned banks' complaints that credit unions are unfairly exempt from being taxed.
“The latest profit report . . . for banks and thrifts is merely more evidence that bankers' carping about the credit unions is just more hot air,” said Dan Mica, president and chief executive of Credit Union National Association, a trade group.
“How could credit unions possibly be having any impact on this industry – except standing in the way of even more earnings?” Mica said.
The industry's federal regulator, the National Credit Union Administration, said last week that assets of federally insured credit unions rose 2.5 percent to $695.4 billion in the first quarter, from $678.2 billion.
Loans increased 0.9 percent to $462.5 billion from $458.2 billion. First-quarter loan growth was 10.4 percent higher than a year ago.
The amount of delinquent loans and net charge-offs declined an annualized 13.1 percent, the NCUA said.
For banks, the FDIC said net loan losses dropped 23.4 percent to $5.5 billion in the first quarter, mostly due to the decline in charge-offs of credit card loans after a surge in personal bankruptcy filings in the fourth quarter of 2005.
“Following that surge, bankruptcies fell back to below-normal levels, a development mirrored in the low loss rates on consumer loans during the first quarter,” it said.
Mortgage-related assets accounted for nearly a third of total asset growth in the first quarter.
Residential mortgage loans rose 2.8 percent to $2.1 trillion, but home equity loans declined for the second straight quarter as borrowers refinanced variable-rate home equity loans into fixed-rate junior mortgages.
Home equity loans dropped less than 1 percent, falling $3.6 billion to $530.65 billion.
The FDIC also said no insured institutions failed, the seventh straight quarter without a failure.
