U.S. bank earnings rise to $40.2 bln in second quarter 2014 -FDIC

WASHINGTON Thu Aug 28, 2014 10:04am EDT

WASHINGTON Aug 28 (Reuters) - U.S. bank earnings rose to $40.2 billion in the second quarter of 2014 as institutions set aside less money for possible losses on loans and cut expenses such as employee salaries, according to data released on Thursday by the Federal Deposit Insurance Corp (FDIC).

The data showed bank earnings during the period from April through June were up $2 billion, or 5.3 percent, from the $38.2 billion reported in the same period of 2013.

Overall, bank revenue fell $1.5 billion, or 0.9 percent, to $169 billion during the quarter, the FDIC said, as income dipped on sales, securitization and servicing of residential mortgages.

But banks were still able to boost earnings compared with a year earlier by cutting the amount of money they hold in case of loan losses by $1.9 billion, or 22.4 percent, to $6.6 billion in the second quarter of 2014.

That was the smallest amount set aside since the second quarter of 2006, the FDIC said. Banks have used this strategy to boost earnings in previous quarters, as income from mortgages and trading activity remained weak.

"Industry revenue has been under pressure from narrow net interest margins and lower mortgage-related income," FDIC Chairman Martin Gruenberg said in a statement. "Nonetheless, on balance, results from the second quarter reflect a stronger banking industry and stronger community banks."

Banks reduced expenses on employee salaries and benefits as the industry cut its total headcount by more than 37,000 people compared with a year earlier, the FDIC said.

Strong loan growth during the quarter led net interest income to post its biggest yearly rise in 14 quarters, up $2 billion, or 1.9 percent, from the same period a year earlier.

Loan growth during the second quarter of 2014 was the strongest it had been since the end of 2007, the FDIC said. The improvement was led by growth in commercial and industrial lending. (Reporting by Emily Stephenson; Editing by Mohammad Zargham)

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