American bank earnings in first quarter hit 5-year high

U.S. bank earnings rose in the first three months of the year to the highest level in nearly five years, while the number of troubled banks fell for the fourth straight quarter. The Federal Deposit Insurance Corp. reports this morning the banking industry earned $35.3 billion in the January-March period. That’s up from $28.7 billion in the first quarter of 2011 and the highest level since the second quarter of 2007. About 67% of U.S. banks reported improved earnings. The number of banks on the FDIC’s confidential “problem” list fell in the first quarter to 772, or around 9.5% of all federally insured banks; that compares with 813 troubled banks in the fourth quarter of 2011. The surge in first-quarter earnings follows the industry’s most profitable year since 2006, a sign that many banks have put the 2008 financial crisis behind them. Still, last year’s increase came largely because banks suffered fewer losses—not because they took in more money. The slow recovery, record-low interest rates and weak demand for loans left bank revenue mostly flat for the year. That may be changing. The banking industry posted a 3% increase in revenue from a year earlier, bolstered by higher profits from loans and fees on customers’ bank accounts. It was only the second time in the last five quarters that revenue rose, the FDIC says. And bank losses on loans declined in the January-March period to $21.8 billion—the lowest level in four years.