Magazine article American Banker

S&Ls Posted Record Profits of $5.1 Billion Last Year

Magazine article American Banker

S&Ls Posted Record Profits of $5.1 Billion Last Year

Article excerpt

WASHINGTON - Thrift profits nearly tripled last year, to $5.1 billion breaking the $3.9 billion record set in 1978, the Office of Thrift Supervision said Thursday.

In the fourth quarter thrifts earned $1.1 billion, 33% more than a year earlier but 9.2% less than in the third quarter.

After suffering disastrous losses in the 1980s, the savings and loan industry has now made money for eight straight quarters.

Milestone in Profitability

And thrifts earned 57 cents on each $100 of assets last year, their best level of profitability since 1979.

Part of the improvement reflects the fact that more than 700 insolvent institutions have been shut in the past four years.

"When you take out institutions that generate huge losses, then the residual looks much better," acting OTS Director Jonathan Fiechter acknowledged.

"Nevertheless," he added, "the industry is much stronger today."

"This is a remarkable performance for an industry that was significantly troubled just a few years ago," said Paul A. Schosberg, president of the Savings and Community Bankers of America.

Healthy Margins

The rebound has also stemmed from the sharp drop in short-term interest rates. The spread between the rate thrifts pay on deposits and what they receive on loans and securities has steadily widened. At the end of last year, the average net interest margin was 3.33%, up from 2.91% two years earlier.

The growing profits have enabled surviving thrifts to bolster their capital levels, Mr. …

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