* Bank industry earns $37.6 bln in Q3 -FDIC
* Revenue picks up, banks set aside less in case of losses
* FDIC head says 'fiscal cliff' uncertainty tough for banks
By Emily Stephenson
WASHINGTON, Dec 4 The U.S. banking industry's
third-quarter earnings were the highest for any quarter since
2006 as revenue growth picked up and banks set aside less money
to guard against losses, according to data released on Tuesday
by the Federal Deposit Insurance Corp.
The FDIC quarterly report showed the industry earned $37.6
billion in the third quarter - up $2.3 billion, or 6.6 percent,
from a year earlier.
That was the industry's highest quarterly total since the
third quarter of 2006, the FDIC said.
And while banks again reduced the amount of funds they set
aside in case of losses, revenue growth contributed more to the
earnings boost in the third quarter, bucking a recent trend,
FDIC Chairman Martin Gruenberg said.
"Loan growth is becoming more established," Gruenberg said.
"Banks continue to clean up and strengthen their balance
The report is an encouraging sign that the banking industry
is slowly but surely healing after the 2007-2009 financial
crisis, although some bigger banks are cutting jobs to cope with
persistent pressures, including an industry-wide decline in
Net operating revenues rose $4.9 billion, or 3 percent, from
a year earlier, the FDIC said. Much of the increase came from
asset sales, particularly loan sales.
Banks reduced the amount set aside for losses from loans by
$3.8 billion, or 20.6 percent, compared with a year earlier.
Lending also picked up during the quarter, led by commercial
and industrial loans. The FDIC said it was the fifth time in the
last six quarters that loan balances have risen.
Loan growth remains modest, Gruenberg said, adding that the
FDIC hopes banks will be able to boost revenue in the future by
expanding lending even more.
BANKS WARY OF THE CLIFF
The FDIC chairman said the year-end fiscal cliff, in which a
number of tax cuts will expire and government spending cuts will
kick in if Congress does not prevent it, could hurt banks if it
slows the U.S. economic recovery.
Lawmakers and the White House are trying to hash out a deal
to prevent the fiscal cliff that would include agreeing to a
different deficit-reduction package, but they have yet to agree
on the details.
"Uncertainty about the nation's fiscal situation and
conditions overseas could still present challenges for the U.S.
economy and the banking industry going forward," Gruenberg said.
James Chessen, chief economist at the American Bankers
Association, told reporters on Tuesday that Congress could
reduce some of the uncertainty facing banks by extending a
financial crisis-era temporary deposit insurance program that is
set to expire at the end of 2012.
The program, aimed at business holders of transaction
accounts, has already been extended by lawmakers once. Bank
groups, including the ABA, want Congress to give the program
another two years.
"Why introduce another element of uncertainty at the end of
this year when there's so much that businesses are dealing with
and will deal with because of the results of the fiscal cliff or
new taxes or healthcare costs?" Chessen said.
Gruenberg said the FDIC thinks banks are in a good enough
liquidity position to manage if Congress does not renew the
program, but the decision is up to lawmakers.