Banks' profits down 3.4% in second quarter

Added: (Mon Sep 03 2007)

Pressbox (Press Release) - Profits in the US banking industry dipped 3.4 per cent during the second quarter, new research has revealed.

Net income for the banks fell to $36.7 billion - down from $38 billion for the year ago period - according to figures released by the Federal Deposit Insurance Group and cited in a report cited by bizjournals.com.

The decline came despite an increase in non-net interest income and net interest income, which was up to $88.6 billion during the second quarter compared with $85.8 billion for the same period last year.

The crisis in the sub-prime mortgage market has been cited as the principal factor behind the decline, as problem loans hit their highest level for 17 years. This prompted the banks to increase provisions for potential charge-offs from $6.5 billion to $11.4 billion.

Sheila Bari, chairman of FDIC, said: "Banks continued to face two key challenges - a difficult interest rate environment and ongoing weakness in residential mortgage lending.

"However, under the circumstances, the industry's second quarter earnings performance was very solid. What we see is a banking industry that is generally well capitalized, well diversified and profitable, and is in good position as we go through this period of market adjustment."