WASHINGTON — The number of troubled banks tracked by the Federal Deposit Insurance Corp. fell in the April-June quarter, the first quarterly drop in five years. But growth in bank earnings slowed, a sign that the financial industry is feeling the effects of a weak economy.
The FDIC said Tuesday that there were 865 banks on its confidential “problem” list in the second quarter, or roughly 11.5 percent of all federally insured banks. That was down from 888 in the January-March quarter and the first decline since mid-2006. Those are banks considered to have low capital cushions against risk.
So far this year, 68 banks have failed.
The FDIC also said the banking industry earned $28.8 billion in the second quarter, up from $20.9 billion in the same period last year. That marked the eighth straight quarter that earnings rose from the previous year. But it was the smallest gain in the past seven quarters.
Banks with assets exceeding $10 billion drove the bulk of the earnings growth. They made up 1.4 percent of all banks but accounted for about $23.4 billion of the industry’s earnings in the second quarter.
Those are the largest banks, such as Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. Most of these banks have recovered with help from federal bailout money and record-low borrowing rates.
“Banks have continued to make gradual but steady progress,” Martin Gruenberg, the FDIC’s acting chairman, said at a news conference. But he noted that industry revenues haven’t been growing. “In the last two quarters, revenues were lower than a year earlier,” he said.
Gruenberg and other FDIC officials said the industry continues to struggle with flat growth in loans. Banks’ loan balances increased $64 billion in the second quarter. That was a modest gain, but it marked the first time in three years that there has been growth in balances, the FDIC said.
