Commercial Bank Earnings Drop 10%

U.S. commercial banks earned $17.4 billion in the third quarter, down almost 10% from $19.2 billion three months earlier, as loan losses and provisions against future loan problems rose steeply, the Federal Deposit Insurance Corp. said.

Banks had earned $19.3 billion in the same quarter a year ago but the agency said the industry’s financial condition remained generally solid despite the slide in profits.

Banks charged off $9.3 billion in bad loans over the third quarter, up almost 64% from a year ago. They also took $11.6 billion in provisions against future loan losses, up more than 70% and the largest quarterly provision since 1990.

The industry’s average return on assets, a basic yardstick of profitability, also slid to 1.08% in the third quarter, down from 1.21% in the previous quarter and 1.28% in the third quarter of last year, the FDIC said.

But it also noted more than half of U.S. banks had nonetheless reported higher earnings in the third quarter than a year ago, with most loan problems and increased provisions concentrated in the commercial and industrial loan portfolios of the largest banks.