Bullish Indicators Abound in FDIC Quarterly Banking Profile

American Banker  |  Friday, May 21, 2010 | By Joe Adler 

WASHINGTON — After a string of quarters marked by bad loans and tepid earnings, the Federal Deposit Insurance Corp. shared some genuinely upbeat news Thursday, suggesting the industry is headed toward recovery.

Banks slashed their loss provisions in the first quarter by 18%, which, combined with a 3% drop in noninterest expenses, helped drive the industry's best earnings performance in two years.

"The positive signs I've outlined today suggest that the trends continue to move in the right direction," FDIC Chairman Sheila Bair said in releasing the Quarterly Banking Profile.

The $18 billion quarterly profit was a turnaround from the end of 2008, when losses neared $40 billion. While officials said credit distress is still a reality — 73 banks were added to the problem bank list — they signaled more optimism for the future, including more lending.

"As banks and thrifts continue to strengthen their balance sheets, they are putting themselves in a better position to meet the growing demand for credit that is being generated by a recovering economy," Bair said.