The government says the number of troubled banks kept growing last quarter even as the industry as a whole had its best quarter in two years, the Associated Press reports.
The Federal Deposit Insurance Corp. said Thursday that the number of banks on its confidential “problem” list leaped to 775 from 702 in the January-March period. But banks overall posted net income of $18 billion. That was up from $5.6 billion in the same quarter a year earlier.
“The banking system still has many problems to work through, and we cannot ignore the possibility of more financial market volatility,” FDIC Chairman Sheila Bair acknowledged. But, she added, “The trends continue to move in the right direction.”
The largest banks showed the most improvement. But a majority of institutions posted gains in net income.
In another sign of health, the FDIC’s deposit insurance fund, which fell into the red last fall, posted its first improvement in two years. Its deficit shrank by $145 million to $20.7 billion. The FDIC said it expects U.S. bank failures to cost the insurance fund around $100 billion through 2013.
Delinquencies on commercial real estate loans remain a source of trouble. That’s especially true at smaller and mid-sized banks.
Last year, 140 federally insured institutions failed and were shut down by regulators. It was the highest annual number since 1992 during the peak of the savings and loan crisis. Last year’s failures extended a string of collapses that began in 2008, triggered by loan defaults in the financial crisis.
The pace of bank collapses this year exceeds last year’s. So far, 72 banks have failed in 2010. As a result of those failures and bank mergers, the number of FDIC-insured institutions fell to 7,932 in the first quarter. That’s the first dip below 8,000 in the history of the FDIC, which was created in 1933.
