“The banking industry continues to steadily march forward, with solid increases in business lending, strong capital levels and a continued decline in problem loans. At the same time, uncertainty surrounding the pace of economic growth is keeping risk higher than normal and may make businesses less inclined to borrow going forward.”
Business Loans Grow for Seventh Consecutive Quarter
“Business loans continue to be in high demand, showing a year-over-year, double-digit increase. Total lending volumes continue to suffer solely because of weakness in the housing sector. The overall lending volume for banks will continue to grow at a gradual pace until the housing market improves.”
Problem Loans Plummet, Failures Continue to Decline
“The industry’s asset quality continues to improve as banks put losses behind them, with problem loans falling to levels not seen since early 2009. The number of problem banks dropped below 800 for the first time since December 2009, and bank failures continue to fall. Failure costs are running about one-third below what the FDIC expected for this year. Banks, not taxpayers, are solely responsible for all of the FDIC’s expenses, paying about $13.7 billion in premiums over the last year.”
Capital Continues to Grow
“The industry’s capital ratios are at or near record levels, the latest indicator that banks are well prepared for any challenging economic circumstances that could arise. Banks have added almost $300 billion in capital since 2008 when the financial crisis took hold. Total industry capital is now almost $1.6 trillion. Banks also have set aside more than $183 billion in reserves to cover possible loan losses. Capital plus reserves gives a total buffer protecting the industry of more than $1.77 trillion.”
Steady Growth in Bank Earnings
"Mortgage refinancing and capital markets, along with a gradually improving economy, have led to a steady growth in bank earnings. The pace of the economy will determine how quickly banks’ core lending business will return. In addition, the European crisis and continued concerns over U.S. debt will have a significant impact on whether businesses decide to expand operations. Banks remain focused on controlling costs as a means of sustaining earnings in today’s environment.”
Deposits Continue to Flow Into U.S. Banks
“Deposits continue to flow into U.S. banks as depositors around the world seek the safety of U.S. institutions. U.S. banks remain the most secure place to keep your money, and this steady increase in deposits reflects continued confidence in our nation’s banking system.”
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The American Bankers Association represents banks of all sizes and charters and is the voice for the nation’s $13 trillion banking industry and its two million employees. Learn more at aba.com.