U.S. Banks Turn $7.6B Profit In 1Q

Revenue Jumps After Industry Reported Record $36.9B Loss At End Of 2008; Troubled Banks Number 305

(CBS/ AP)  The nation's banks turned a profit in the first quarter, but the number of problem banks jumped to more than 300, the government said Wednesday.

The Federal Deposit Insurance Corp. said higher trading revenues at big banks helped the industry earn a $7.6 billion profit in the January-March period, compared with a record loss of $36.9 billion in the fourth quarter. The profit was 61 percent below the $19.3 billion earned in the year-ago period and followed the first quarterly loss in 18 years.

The news comes as 74 percent of economists in a recent survey said the economy will start to grow in the third quarter after suffering further contraction in the current one. Government spending to free up credit markets is seen as the driving force behind any recovery.

U.S. banks and thrifts set aside $60.9 billion in the first quarter to cover potential loan losses, up from $36.2 billion a year earlier.

The number of troubled banks jumped to 305, the highest number since 1994 during the savings and loan crisis, from 252 in the fourth quarter, according to the FDIC.

Thirty-six federally-insured institutions already have failed and been shut down by regulators this year, extending a wave of collapses that began in 2008. This year's tally compares with 25 in all of 2008 and three in 2007.

The failures sliced the amount in the deposit insurance fund to $13 billion in the first quarter, the lowest level since 1993. That compares with $17.3 billion a year earlier.

"Troubled loans continue to accumulate" and the costs to banks from soured loans "are weighing heavily on the industry's performance," FDIC Chairman Sheila Bair said. "Nevertheless, compared to a year ago, we see some positives."

Those include the increase in banks' net interest income and revenue from sources other than interest such as trading, she said.

The first-quarter results "are telling us that the banking industry still faces tremendous challenges," Bair said.

The FDIC believes U.S. bank failures will cost the deposit insurance fund around $70 billion through 2013.

The FDIC on Friday adopted a new system of emergency fees paid by U.S. financial institutions that will shift more of the burden to bigger banks to help replenish the insurance fund. The move by the agency cut by about two-thirds the amount of special fees to be levied on banks and thrifts compared with an earlier plan, which had prompted a wave of protests by small and community banks.

The new system is intended to raise about $5.6 billion. Additional emergency assessments could come later in the year, the FDIC said.

Congress last week more than tripled the amount the FDIC could borrow from the Treasury Department if needed to restore the insurance fund, to $100 billion from $30 billion. Bair had earlier promised a reduction in fees charged to banks if that credit line could be expanded.

The FDIC also recently levied a surcharge on banks issuing debt under the agency's temporary rescue program. Under it, the FDIC guarantees hundreds of billions of dollars in debt in the event of payment defaults by the issuing banks. Those surcharges, nearly $8 billion collected already, will help compensate for the reduction in insurance premiums, the agency said.

Government "stress tests" of the 19 biggest U.S. banks early this month showed that nine of them have enough capital to withstand a deeper recession. The remaining 10 must raise a total of $75 billion in new capital to withstand possible future losses. Of those, Bank of America Corp. needs the most by far - $33.9 billion. Wells Fargo & Co. needs $13.7 billion, auto lender GMAC LLC $11.5 billion, Citigroup Inc. $5.5 billion and Morgan Stanley $1.8 billion.

The five other banks found to need more of a capital cushion are regional institutions: Regions Financial Corp. based in Birmingham, Ala.; SunTrust Banks Inc. of Atlanta; KeyCorp of Cleveland; Fifth Third Bancorp of Cincinnati; and PNC Financial Services Group Inc. of Pittsburgh.

The tests were a key part of the Obama administration's plan to fortify the financial system. The banks have until June 8 to develop a plan and have it approved by their regulators. If they can't raise the money on their own, the government said it is prepared to dip further into its bailout fund.

The closing last week of struggling Florida thrift BankUnited FSB is expected to cost the insurance fund $4.9 billion, the second-largest hit since the financial crisis began. The costliest was the July 2008 seizure of California lender IndyMac Bank, on which the insurance fund is estimated to have lost $10.7 billion.

The largest U.S. bank failure ever also came last year: Seattle-based thrift Washington Mutual Inc. fell in September, with about $307 billion in assets, and was acquired by JPMorgan Chase & Co. for $1.9 billion in a deal brokered by the FDIC.

[biggcheese1]

I have absolutely no sympathy for banks or bankers. The American taxpayers bailed them out to the tune of billions of dollars and what's the first thing they do? Sneak in interest hikes before the new credit card legislation goes into effect in nine months. And, I'll bet they sneak in another hike before then. I've said it before and I'll say it again; based on the fact that absolute power corrupts absolutely, unregulated businesses will turn corrupt at the first opportunity. All deregulating legislation passed after 1980 should be rescinded and the prior rules applied once more. That would put us back into the same world we had between 1945 and 1980 BR (before Reagan) that made the US the greatest CREDITOR nation in the world. To think, it took less than 25 years for deregulated greed and corruption to take us where we are now. Wow. Think of what another eight years of republican rule would do. Can you say, "Do you want some gutter water to drink with your dog meat?"

[wogerwabbit]

Posted by NoTruthinDC at 3:00 PM : May 27, 2009

ACORN??? What are you smoking? You had me until you got stupid.

[noloyalisti]

We still need to re-organize (split them up) and nationalize. Why should they get to keep huge profits for their already rich executives while we small businesspeople and homeowners get screwed. Must be America, where the rich get richer and there is equal opportunity for all. Yeah.

[whitemale08]

It doesn't matter, Goldman Sucks and JP Morgan are still insolvent because according to the Federal Reserve's own website they have trillions in exposure to worthless derivatives and credit-default swaps.

And according Bloomberg headline yesterday they are using a fraudelant accoumting rule that says you can count un-realized earnings from mortgage losses if you pretend that the losses didn't happen in the first place.

THAT'S FRAUD!!!!!!!!

GOLDMAN SUCKS AND JP MORGAN ARE COMITING BANK ACCOUNTING FRAUD!!!!

PUT GOLDMAN SUCKS INTO RECEIVERSHIP NOW!!!!

[sjc_1]

'Innovation' in the financial sector is another word for 'gambling'.

Well said indeed. It is another implementation of the "free market", where you have a free for all looting under the guise of deregulation. So much for this conservative ideology.

[ubrew12]

So the banks went from a $36 billion quarterly loss to a $8 billion quarterly profit. Given this kind of volatility, one would think the banks were dotcom or biotech companies.

How does a sector with a business plan as simple and straightforward as banking produce such volatility? By CEO's pretending their bank is a dotcom or biotech company. Enough with financial 'innovation', especially since 'innovation' in the financial sector is with other people's money (depositor, borrower, and taxpayer, not just investor as it should be). Bring in the regulators and get the banks back to the business they were meant for. 'Innovation' in the financial sector is another word for 'gambling'.

[grabandgo]

Isn't it great how well they are doing with OUR MONEY?
WHEN DO WE GET PAID BACK?

[legacyabq]

"U.S. Banks Turn $7.6B Profit In 1Q"


Obama the dictator must be drooling at the thought of stealing these profits from the banks...
Posted by ----One--American---- at 10:15 AM


WHAT ARE U TALKING ABOUT?????

WE JUST LOANED THESE BANKS BILLIONS OF DOLLARS

Are you saying we shouldnt collect?

Why is that?

Are you saying that its OK for the banks to steal our money, but then call Obama a thief for wanting them to pay their honest debts??

Are you crazy man??

Those banks OWE US MONEY

[legacyabq]

My question is


ARE THE BANKS GOING TO PAY BACK THE MONEY WE GAVE THEM

with interest also???

Because if the situation had been reversed, they would NOT HESITATE to reposess our houses, cars, 401 K plans whatever..

How many of you have seen your 401 K disappear because of the actions of these banks and investors?

Why is it OK for them to make a profit, with the help of US govt money, and then foreclose on millions of people and destroy the value of the dollar?

Why is this acceptable, morally?

I hope there is a special hell for speculators and bankers who think nothing of turning families out on the street and then laugh all the way to their own bank, watching their fat profits increase after lying to the public and conspiring to pretend they were in "crisis".

Bankers, predators, scum, I hope you all burn in hell!

[legacyabq]

LMAO

Recession? What recession?

Its all in our heads. Pure psychology.

Just think: those banks made all this profit, yet we "had to" give them billions of dollars to keep them from collapsing??

Ha!

OK

Lets say bank is 1 million short of breaking even.

We loan them 1 mill.

Then they report a profit of 1 mill.

Hmm.. -1 plus 1 is zero, not 1..

So where did the math go wrong?

Ill tell you. The banks were NEVER AT "-1". They call breaking even FAILURE, because to them 0 growth is like shrinking. So they cant stand just breaking even. Its either "we profit enormously" or "we are going under" when really they're only BREAKING EVEN.

I thnk we got RIPPED OFF

They could have NOT taken the money, and then this report would be called

"Good news, banks make it after all. Yes, they didn't make earth-shattering profits, but they survived"

Thats what would have happened if we hadnt given them all that money..

But god knows those bankers need more yachts, and their little scare tactics and spooky lobbyists warning of collapse got them what they wanted from the govt., the governemt that is

OF THE BANKS, BY THE BANKS, AND FOR THE BANKS

Hey!~ Hows that interest on the national debt doing these days?
Did you know that the interesat on the national debt is

P A I D TO P R I V A T E B A N K S ?!?!?!

The federal reserve is oh so american!

Oh well. We all still have our groceries and our internet and our cigarettes, so I guess everything's OK.

Just crack another can, fart, turn over, and switch on the ol' TV baby!

Yeah!

God bless america bee-itches!!

[incog-nito]

Let's see: GM and Chrysler is going bankrupt, with hundreds of thousands of decent paying jobs potentially lost. On the other hand, financial institutions get the taxpayer-funded bailout and make a profit, with most of the money going to the very top. Yeah, the American worker will make a lot of money working as bank tellers (actually, with online banking they don't need a lot of tellers anyway).

America sure has its priorities screwed up.

[Livinontheedge]

This just proves that the economical crisis was another lie perpetrated by the Bush administration to rob the american taxpayer of nearly a trillion dollars before they left office and to cause the democratic administration to have to spend more taxpayer dollars in order to fix the Bush -Cheney theft in office.

[clancy49]

Obviously banks don't have to pay back loans, much less loans with interest, or how could there be a profit? Don't we mere peons wish we could get away with that, but of course that wouldn't be acting responsibly? We all know that every single American tax paying worker is a dead beat right? We all buy things we can't afford and don't need right? Bankers are so much more responsible like raising interest rates, stealing money legally with over limit fees, (after they dropped your limit), late fees, annual fees, tax fees, fee fees, and of course never spend unwisely like lavish vacations and gigantic bonuses. Bankers are far more responsible so why should they pay back loans?

[the74blaster]

If they think the intelellectuals will leave their company, please explain where they are going to go. Jobs are scarce!!!
Posted by au_fait at 10:20 AM : May 27, 2009

I think the more appropriate question is who would want these people working for them. A bank owner could find anyone they wanted to make bad business decisions and bankrupt their firm.

Who needs high priced talent to do that?

[summarex]

OK so let's take that money from them.
Everything those vultures have they stole from us!

[au_fait]

Wow, until the loans are paid back there is no profit. The media really needs to learn how to report truth and not enhance, alter or lie. The facts are the banks owe millions to the taxpayers, so there should be no bonuses, no profit sharing no nothing until the debt their debt is paid. If they think the intelellectuals will leave their company, please explain where they are going to go. Jobs are scarce!!!

[picchip]

So you are saying it ok for a big company to impersonate the police? Or are you just missing the point. As yes the payment were being made when the call were left.

[jackp32]

Keep it up. Profits are occurring because you quit loaning money to deadbeats and told Barney Frank and Chris Dodd to just shut up.

[picchip]

JPMorgan Chase Auto Finance collection department Pose as Los Angeles Police to Harass Customers ! Check out www.f-chase.com to hear tapes for your self.

[jsachse]

Considering the increase in interest rates on credit cards, this is hardly surprising. If Obama's plan was to get my interest rates doubled, then yes, his plan is working.