Assistance from the US government has helped the country's banking industry back into profit, but the improvement hasn't been reflected in increased lending, according to the Federal Deposit Insurance Corporation (FDIC).
In its latest Quarterly Banking Profile, issued yesterday, the FDIC reports an aggregate net income for the banks it supervises of $914 million in the fourth quarter of 2009, down from $2 billion in the third quarter but still a huge rebound from the $37.3 billion loss the industry suffered in the fourth quarter of 2008.
But the report has more bad news than good. Non-current loans and leases, mainly residential mortgages, continued to rise, hitting $391.3 billion – 5.37 percent of all loans by value, the highest level ever recorded. And, the FDIC adds, the industry also reduced its coverage ratio – reserves as a fraction of non-current loans and leases – to a 28-year low of 58.1percent. In other words, the banks only managed to scrape into the black by deciding not to increase their reserves in line with their problem loan books – had they done so, it would have meant another $7.4 billion in reserves, meaning the industry would have been well into the red.