FDIC institutions' Q1 net declines 61 per cent to $7.6 billion

28 May 2009

Net income of commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) declined $11.7 billion or 60.8 per cent to $7.6 billion in the first quarter of 2009 from the $19.3 billion for the same period of 2008.

Higher loan-loss provisions, increased goodwill write-downs, and reduced income from securitisation activities all contributed to the year-over-year earnings decline, the FDIC said in a press release yesterday.

Three out of five insured institutions reported lower net income in the first quarter and one in five was unprofitable.

"The first quarter results are telling us that the banking industry still faces tremendous challenges, and that going forward, asset quality remains a major concern," said FDIC chairman Sheila C Bair.

"Banks are making good efforts to deal with the challenges they're facing, but today's report says that we're not out of the woods yet," she said.

"As I see it, we're now in the cleanup phase for the banking industry. It will take some more time. But in the end, we'll have a stronger banking industry that's better able to meet the demand for credit as the economy recovers," Bair added.