Thursday August 27, 04:19 PM
US banks lose collective $3.7 bln in 2nd quarter
WASHINGTON (AFP) - The US banking industry lost a collective 3.7 billion dollars in the second quarter amid heavy write-downs and provisions for bad loans, the government's insurance agency said Thursday.
The Federal Deposit Insurance Corporation (FDIC), which insures bank and thrift deposits, said the sector swung to a loss compared with a profit of 4.8 billion dollars in the same period of 2008.
"While challenges remain, evidence is building that the US economy is starting to grow again," said FDIC chair Sheila Bair.
"Banking industry performance is -- as always -- a lagging indicator. The banking industry, too, can look forward to better times ahead. But, for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry's bottom line."
The FDIC's quarterly survey showed provisions for loan losses totalled 66.9 billion dollars, an increase of 16.5 billion or 32.8 percent over the second quarter of 2008.
Losses stemming from write-downs of asset-backed commercial paper totalled 3.6 billion dollars, compared to write-off of 366 million a year earlier.
At the end of June, there were 416 insured institutions on the FDIC "problem list," up from 305 on March 31 and the largest since 1994.
Total reserves of the FDIC's insurance fund stood at 42 billion dollars at the end of the quarter.
Funds set aside for its contingent loss reserve rose to 32 billion dollars as of June 30, reflecting higher actual and anticipated losses from failed institutions.
Bair said the agency still had 22 billion of cash and US Treasury securities available as of June 30, as well as the ability to borrow up to 500 billion dollars from the Treasury.
"A decline in the fund balance does not diminish our ability to protect insured depositors," she noted.
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