Magazine article American Banker

Heading for Another Record, Banks Made $14.8B in Quarter

Magazine article American Banker

Heading for Another Record, Banks Made $14.8B in Quarter

Article excerpt

On track to set a sixth consecutive annual earnings record, commercial banks made $14.8 billion in the third quarter, the government reported Thursday.

"As we head into the holiday season, it is clear that, for banks, the economy is a gift that keeps on giving," acting Federal Deposit Insurance Corp. Chairman Andrew C. Hove Jr. said.

Through Sept. 30 commercial banks have earned $44 billion. Mr. Hove said 1997 earnings are "virtually guaranteed" to surpass last year's $52.4 billion record.

While the third-quarter increase was relatively small - $131 million or less than 1% - it was nearly 7% more than banks earned in the year-earlier period.

Third-quarter profits were driven largely by a turnaround at the 74 banks that specialize in credit cards. Earnings at these institutions more than doubled during the quarter to $1.3 billion from $631.8 million. Profits at these banks had fallen 35% in the second quarter due to loan- loss provisions and one-time expenses, the FDIC said.

"Without the increase in the quarterly profits at credit card banks, total earnings for the industry would have declined compared to the second quarter," Mr. Hove noted.

Credit card banks bounced back despite a continued climb in writeoffs. The losses, at 5.35% of card loans, were 13 basis points higher than in the previous quarter and 94 basis points above the year-earlier level, the FDIC said. Credit card loans accounted for nearly two-thirds of the $4.8 billion in loans that commercial banks charged off in the third quarter.

Fee income and trading revenues fueled earnings as noninterest income hit $2.1 billion in the third quarter. That's an 8.3% increase from the previous quarter and 19.3% more than the third quarter of 1996.

Profits reported by 9,215 commercial banks were tempered by one-time restructuring and merger-related charges, which added about $1 billion to pretax expenses. …

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