Banks Profits Fell 27% last year: FDIC

Banks and thrifts saw their earnings drop more than 27 percent in 2007 to $105.5 billion from $145.2 billion in 2006, according to a release today from the Federal Deposit Insurance Corp. In addition, fourth quarter earnings fell to $5.8 billion, the lowest level seen since 1991.

The average return on assets in 2007 was 0.86 percent, down from 1.28 percent a year ago. The ROA is used to measure earnings performance.

The FDIC reported the numbers in its Quarterly Banking Profile today.

The agency attributed the decline to higher provisions for loan losses in the mortgage and construction industries and lower trading revenue.

Much of the earnings drop for the industry was driven by declines at six large institutions, though fewer than half of all the FDIC-insured institutions reported increased net income last year.

Overall, more that 25 percent of institutions with assets greater than $10 billion posted a net loss in the fourth quarter.

Loan loss provisions in the fourth quarter more than doubled to $68.2 billion from $29.5 billion in the same period a year ago. Trading revenue fell more than 78 percent to $4.1 billion, from $14.9 billion.

Loans 90 days or more past due or in nonaccrual status “registered the largest quarterly increase in 24 years” in the fourth quarter, the FDIC reported. As of Dec. 31, 2007, 1.39 percent of al loans were noncurrent.

On the bright side, “the overwhelming majority of banks and thrifts remain well-capitalized and profitable,” FDIC Chairman Sheila C. Bair said in a statement. Nearly 90 percent of FDIC-insured institutions were profitable during 2007, the agency reported.

The FDIC tracks results from the 8,534 banks and thrifts it insures nationwide.