Newspaper article THE JOURNAL RECORD

U.S. Bank Earnings Surge to Record

Newspaper article THE JOURNAL RECORD

U.S. Bank Earnings Surge to Record

Article excerpt

WASHINGTON _ An improving economy and low interest rates on deposits drove profits in the once-troubled commercial banking industry to another record in the July-September quarter.

The nation's 11,081 banks earned $11.45 billion in the third quarter, up from $10.4 billion in the second quarter and the previous record of $10.8 billion in the first, the Federal Deposit Insurance Corp. said Wednesday.

For the first nine months of this year, bank profits already have surpassed the full-year record of $32.1 billion in 1993.

And regulators, bankers and analysts said the outlook for next year is almost as good.

"It's probably optimistic to think it will continue at the level we have . . . but clearly earnings are strong and ... we see nothing that will change," said acting FDIC Chairman Andrew C. Hove Jr.

He attributed the profits to the improving economy and to the wide gap between short-term interest rates on deposits and longer-term rates on loans and other bank investments.

The gap between banks' interest expenses and earnings was down for the third consecutive quarter, but at 4.45 percentage points, it was not far under the record 4.67 percentage points of the fourth quarter of 1992.

Hove said banks now were clearly in a position to increase their lending, but according to the report loans to businesses declined for the 13th time in 14 quarters, hitting $530 billion, the lowest level in 10 years.

However, loans to consumers are increasing. And Hove and economist James Chessen of the American Bankers Association predicted commercial lending would start growing next year.

"The stage they're in for business lending is what I call the dating stage," Chessen said. "There's a lot of talk and not much action. We'll start to see a lot more commercial lending in 1994."

In the meantime, Chessen said banks are increasing profits from non-traditional activities such as selling mutual funds and data processing services. …

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