November 29, 2016 / 6:00 PM / in a year

UPDATE 1-FDIC finds higher bank income, fewer unprofitable lenders

(Adds Gruenberg staying as head of FDIC, link to report)

WASHINGTON, Nov 29 (Reuters) - U.S. banks’ net income increased 12.9 percent, up $5.2 billion, in the third quarter as the number of struggling lenders fell, the Federal Deposit Insurance Corp said on Tuesday.

Total lending increased 6.8 percent, or $591 billion, from a year earlier, in part because of strength in new home loans and commercial real estate, said the regulator, which shields bank deposits if a lender fails.

The FDIC said the share of unprofitable banks, 4.6 percent, was the lowest since the third quarter of 1997.

The FDIC’s findings were included in its Quarterly Banking Profile, which gives a snapshot of the health of the banking sector.

The Federal Reserve has kept interest rates low since the 2008 financial crisis, but banks should expect that to change, said FDIC Chairman Martin Gruenberg.

“Low interest rates for an extended period have led some institutions to reach for yield,” Gruenberg said in a statement. “Banks must position themselves for rising interest rates going forward.”

Gruenberg said on Tuesday that he planned to stay through his entire five-year term, which ends next November.

Reporting by Patrick Rucker; Editing by Meredith Mazzilli and Lisa VOn Ahn

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