U.S. banks reported the biggest jump in delinquent loans in 16 years, largely because of the troubled real estate sector, regulators said last week.
The Federal Deposit Insurance Corp., in its Quarterly Banking Profile, said the share of past-due loans — those late by 90 days or more — jumped $6.4 billion, or 10.6 percent, in the second quarter. That’s the biggest quarterly spike since the end of 1990.
Nearly half the deterioration was in home mortgages, with the number of non-current loans rising $3.1 billion, or 12.6 percent. Delinquent home-equity lines of credit jumped 16.6 percent. At the same time, past-due real estate development and construction loans surged $2.2 billion, or nearly 40 percent, in the quarter.
Further, 824 of the more than 8,600 banks the FDIC oversees reported net losses for the quarter. That’s up from 600 a year earlier and the largest annual increase in over a decade. The problems were most acute at smaller banks and thrifts and those with lots of mortgages and commercial loans.
Overall, bank profits were down 3.4 percent from a year ago, though still the fourth-best on record. “We’ve had a tremendous golden age of banking, and we’re not going to continue to see that kind of performance,” said FDIC Chairman Sheila Bair, calling the current credit environment “more challenging.”
Banks charged off $9.2 billion in loans in the second quarter, a more than 50 percent increase from a year ago, the FDIC said.
In the past year, the once-highflying housing market has taken a nose dive.
