Aug 27, 2009US banks lose $5.4b in Q2
WASHINGTON - THE US banking industry lost a collective US$3.7 billion (S$5.36 billion) in the second quarter amid heavy writedowns and provisions for bad loans, the government's insurance agency said on 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 recognising 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 totaled US$66.9 billion, an increase of US$16.5 billion or 32.8 per cent over the second quarter of 2008.
Losses stemming from writedowns of asset-backed commercial paper totaled US$3.6 billion, compared to writeoff of US$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 US$42 billion at the end of the quarter.
Funds set aside for its contingent loss reserve rose to US$32 billion as of June 30, reflecting higher actual and anticipated losses from failed institutions.
Bair said the agency still had US$22 billion of cash and US Treasury securities available as of June 30, as well as the ability to borrow up to US$500 billion from the Treasury.
'A decline in the fund balance does not diminish our ability to protect insured depositors,' she noted. -- AFP
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