U.S. bank earnings fall on weak mortgage revenue in Q1 2014-FDIC

WASHINGTON Wed May 28, 2014 10:00am EDT

WASHINGTON May 28 (Reuters) - U.S. bank earnings fell to $37.2 billion in the first quarter of 2014, a 7.6 percent dip compared to the same period a year earlier as mortgage revenue dropped sharply and trading income also declined.

Data released on Wednesday by the Federal Deposit Insurance Corp (FDIC) showed bank earnings in the first three months of 2014 down $3.1 billion from the $40.3 billion reported in the first quarter of 2013.

The FDIC said higher interest rates dissuaded consumers from refinancing mortgages. Income from mortgage sales, securitization and servicing fell by $4 billion, or 53.6 percent, compared to a year ago.

"Since the increase in longer-term interest rates in the second quarter of 2013, mortgage income over the past three quarters has been about half of what it was over the previous six quarters," FDIC Chairman Martin Gruenberg said in a statement.

The industry's revenue fell by $6.7 billion, or 4 percent, to $163.7 billion in the first quarter. Besides mortgages, the decrease reflected a $1.4 billion, or 18.3 percent, drop in trading revenue compared to a year earlier.

The biggest U.S. banks have reported lackluster trading revenue. JPMorgan Chase, for instance, posted weaker-than-expected profit in the first quarter as both bond trading and mortgage lending revenue tumbled.

The industry's earnings also were inflated in the first quarter of 2013 by a one-time gain at one bank related to a litigation settlement. That gain was not repeated this year.

Despite the decline in earnings overall, the FDIC said more than half of banks saw year-over-year growth in their earnings during the quarter. Asset quality improved, with banks charging off fewer uncollectible loans, and the percentage of noncurrent loans and leases fell to its lowest level since 2008.

The FDIC said banks are seeing diminishing ability to boost profits by reducing the amount they set aside in cases of losses on loans. Banks set aside $7.6 billion during the quarter, a $3.3 billion decrease from the year earlier. (Reporting by Emily Stephenson; Editing by Andrea Ricci)

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