WASHINGTON -- U.S. bank earnings jumped 11.9 percent in the final three months of 2015 compared with the previous year on rising revenue. Legal expenses declined as some big banks wound down legal settlements that arose from the financial crisis.
Nonetheless, data issued Tuesday by the Federal Deposit Insurance Corp. showed that losses from loans increased for the first time in 5½ years. The increase in loans that banks wrote off as uncollectible was especially strong -- 43.4 percent -- for industrial borrowers as plummeting oil prices hurt energy companies.
"Revenue and income were up from the previous year, overall asset quality continued to improve, loan balances increased, and there were fewer banks on the problem list," FDIC Chairman Martin Gruenberg said in a statement about the fourth-quarter. At the same time, he said, "there are signs of growing credit risk, particularly among loans related to energy and agriculture."
The FDIC reported that U.S. banks earned $40.8 billion in the October-December quarter, up from $36.4 billion a year earlier.
More than half of all banks, 56.6 percent, reported an increase in profit from a year earlier. Only 9.1 percent of banks were unprofitable.
The number of "problem" banks on the FDIC's confidential list fell below 200 for the first time in more than seven years, since the financial crisis.
Gruenberg took note of the impact of the steep fall in oil prices over the past year and a half.
"Recently, domestic and international market developments have led to heightened concerns about the U.S. economic outlook and prospects for the banking industry," Gruenberg said at a news conference. "Thus far, the performance of the banks has not been impacted materially. However, the full effect of lower energy and other commodity prices remains to be seen."
In the fourth quarter, banks increased the amounts they set aside to cover potential losses on loans by 45.5 percent, or $3.8 billion, from a year earlier, the FDIC reported. That raised the total set aside for the latest period to $12 billion -- the highest level in three years.
And lending grew by 2.3 percent, driven by a mostly seasonal increase in credit-card balances and a rise in commercial and industrial loans.
The number of banks on the FDIC's "problem list" fell to 183 from 203 in the third quarter.
The number of bank failures continues to slow, marking eight last year. That is still more than normal. In a strong economy, an average of four or five banks close annually. But failures declined from 24 in 2013 and were down sharply from 157 in 2010 -- the most in one year since the height of the savings-and-loan crisis in 1992.
The decline in bank failures has allowed the deposit insurance fund to strengthen. The fund, which turned from deficit to positive in the second quarter of 2011, had a $72.6 billion balance at the end of December, according to the FDIC. That was up from $70.1 billion at the end of the third quarter.
The FDIC was created during the Great Depression to insure bank deposits. It monitors and examines the financial condition of U.S. banks. The agency guarantees bank deposits up to $250,000 per account.
Information for this article was contributed by Jesse Hamilton of Bloomberg News.
Business on 02/24/2016