FDIC Reports Large Gains for Financial Institutions in Third Quarter

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The Federal Deposit Insurance Corporation (FDIC) announced banks and other financial institutions posted their highest profits in Q3 in six years. The improvement marks a 6.6 percent increase in aggregate net income from the same time last year, with an average return on assets at 1.06 percent. The institutions pulled a total profit of $37.6 billion dollars.

The FDIC’s Quarterly Banking Profile also reported that bank failures had fallen to a four-year low – 12 institutions failed while 49 were merged or absorbed by other entities. Of the FDIC’s 7,181 insured institutions, fewer than 700 are described as “problem” institutions, its lowest number in three years. Problem institutions are defined as having managerial, financial, or operational weaknesses and are characterized by having a high potential for failure or requiring acquisition.

Most importantly, deposits in the third quarter totaled $10 trillion, a growth of 1.8 percent from last quarter. Deposits are an important economic marker, as they essentially determine whether or not banks can lend more money and, thus, continue to push money through the market. Increased velocity of money tends to stimulate economic growth. According to the FDIC profile, deposits funded 73.9 percent of the banking industry’s assets. This is the highest proportion of deposits to assets since the fourth quarter of 1993.

 While these numbers seem promising, the market is still exercising caution. FDIC Chairman Martin Gruenberg noted that the gains were merely modest, particularly as reserves have actually decreased since 2011. “This was another quarter of gradual but steady recovery for FDIC-insured institutions,” said Gruenberg, “Signs of further progress were evident in a number of indicators, such as loan growth, asset quality and profitability.” Banks are generating most of their revenue from loan sales, which could be a sign of an improvement, but economists remain unsettled by the wide ranging discrepancy amongst institutions in growth and loss.

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  1. Brandon Fallon One could say that the banks are doing better because the government bailed them out when their balance sheet was filled with toxic assets. It would be interesting to see these numbers compared to how the real estate and jobs markets is performing nationally. With jobs at least, the nation is netting gains, albeit large and small depending on the month, but that could be a boom to banks and the government takes some of the credit for a good job market. In that logic, one would say the government is to thank for bank profits being up.
  2. Jenny Jo To think that the congress is bailing anyone out whom they didnt owe favors to is naive, and laughable at best. Congressional approval was recently at an all time low, and you think they are doing anything but cashing out? Fantasy land.. it must be nice.
  3. Brandon Fallon I didn't claim that the banks were bailed out. They were and they are benefiting from it, but as the economy improves so does banks' blance sheets.
  4. Marc Schenker Too bad that Obama wasted so much taxpayer money on bailouts for the banks, seeing as how they seem to be flush with profits and cash.
  5. Alex Gauthier i dont think its surprising how profits have soared. Banks were able to shovel off all their liabilities onto the taxpayer and get back to business as usual.
  6. Jenny Jo You can thank your congressmen/women for that. Bought and sold, they did their jobs, and banks are booming again. That ~40 million in campaign contributions last election was a good investment eh?
  7. Matt Metzner A 6.6 percent jump seems like a huge leap within one year. The banking industry is leading the rest of the economy as unemployment levels decrease and consumer spending rises. I'm interested in how this affects income levels across the country.
7 comments
Brandon Fallon
Brandon Fallon

One could say that the banks are doing better because the government bailed them out when their balance sheet was filled with toxic assets. It would be interesting to see these numbers compared to how the real estate and jobs markets is performing nationally. With jobs at least, the nation is netting gains, albeit large and small depending on the month, but that could be a boom to banks and the government takes some of the credit for a good job market. In that logic, one would say the government is to thank for bank profits being up.

Marc Schenker
Marc Schenker

Too bad that Obama wasted so much taxpayer money on bailouts for the banks, seeing as how they seem to be flush with profits and cash.

Alex Gauthier
Alex Gauthier

i dont think its surprising how profits have soared. Banks were able to shovel off all their liabilities onto the taxpayer and get back to business as usual.

Matt Metzner
Matt Metzner

A 6.6 percent jump seems like a huge leap within one year. The banking industry is leading the rest of the economy as unemployment levels decrease and consumer spending rises. I'm interested in how this affects income levels across the country.

Jenny Jo
Jenny Jo

To think that the congress is bailing anyone out whom they didnt owe favors to is naive, and laughable at best. Congressional approval was recently at an all time low, and you think they are doing anything but cashing out? Fantasy land.. it must be nice.

Jenny Jo
Jenny Jo

You can thank your congressmen/women for that. Bought and sold, they did their jobs, and banks are booming again. That ~40 million in campaign contributions last election was a good investment eh?

Brandon Fallon
Brandon Fallon

I didn't claim that the banks were bailed out. They were and they are benefiting from it, but as the economy improves so does banks' blance sheets.