1. Business

Bank profits rose in third quarter as revenues jumped, FDIC says

Published Nov. 26, 2014

WASHINGTON — Profits at the nation's banks rose 7.3 percent in the third quarter as revenues posted their biggest year-over-year increase since 2009, the Federal Deposit Insurance Corp. said Tuesday.

The $38.7 billion in profits at 6,589 federally insured banks was up $2.6 billion from the third quarter of last year.

But profits were down from $40.2 billion in the second quarter of this year.

"The banking industry had another positive quarter," FDIC Chairman Martin J. Gruenberg said.

"Community banks, in particular, performed better than a year ago," he said.

The industry's $171.3 billion in revenues in the third quarter was up 4.8 percent from the same period last year, the FDIC said. It was the best revenue growth since the fourth quarter of 2009.

Gruenberg noted that the increase in profits in the third quarter of this year was based on that revenue growth, rather than a result of banks reducing the money they set aside for losses on mortgages and other loans.

"This can be a more sustainable foundation for continued earnings growth going forward," he said.

So-called loan-loss provisions rose to $7.2 billion in the third quarter, up 24 percent from a year earlier, the FDIC said. It was the first year-over-year increase since 2009.

Gruenberg said he wasn't worried that banks were setting aside more money to cover loan losses. Those provisions had been dropping and needed to increase as banks made more loans, he said.

Bank loan and lease balances rose 4.6 percent to $8.2 trillion in the third quarter compared with a year earlier, the FDIC said. Auto, commercial and industrial loans were up, offsetting a slight drop in mortgages.

Despite what he called "largely good news" for the industry, Gruenberg said low interest rates were putting pressure on banks' profit margins.