US bank health continues to improve

30 May 2012 by Jim Fickett.

Last week the FDIC released the Quarterly Banking Profile for Q1 of this year. The main thrust of the news was that bank health continues to improve. For example, net charge-offs (loans charged against capital because they are deemed uncollectable) dropped to 1.2% of all loans; this percentage rose to 3% during the crisis, but is now down almost to its long-term average of just under 1%. Due to higher income and lower provisions for bad loans, bank profitability continued to improve:

FDIC-insured commercial banks and savings institutions reported $35.3 billion in net income for first quarter 2012. This represents a $6.6 billion (22.9 percent) improvement over first quarter 2011 results, and is the highest quarterly net income reported by the industry since second quarter 2007.

It is unclear what risks may still be hiding in the big banks' loan books, and unclear what further storms await as the euro crisis continues to worsen, but it is at least good news that the health of the US banking sector is much, much better than it was three years ago.