Chairman Gruenberg
Press Conference Opening Statement
on the Third Quarter 2013 Quarterly Banking Profile
November 26, 2013
Good morning, and welcome to our release of third quarter results for the banking
industry.
Chart 1
Insured institutions earned 36 billion dollars in net income in the third quarter. That is
1.5 billion dollars less than the industry earned in the same quarter a year ago. This is
the first year-over-year decline in over four years, and it is mainly attributable to a 4
billion dollar increase in litigation expenses at one institution. Had it not been for that,
the upward trend in earnings would have continued.
Also contributing to the earnings decline was a drop in net operating revenue. That’s
because of a reduction in mortgage lending activity, which I’ll discuss in a moment.
Overall, however, most of the positive trends we have been seeing in industry
performance continued in the third quarter. Fewer institutions reported quarterly losses,
lending grew at a modest pace, credit quality continued to improve, more banks came
off the “Problem List,” and fewer banks failed.
Press Conference Opening Statement
on the Third Quarter 2013 Quarterly Banking Profile
November 26, 2013
Good morning, and welcome to our release of third quarter results for the banking
industry.
Chart 1
Insured institutions earned 36 billion dollars in net income in the third quarter. That is
1.5 billion dollars less than the industry earned in the same quarter a year ago. This is
the first year-over-year decline in over four years, and it is mainly attributable to a 4
billion dollar increase in litigation expenses at one institution. Had it not been for that,
the upward trend in earnings would have continued.
Also contributing to the earnings decline was a drop in net operating revenue. That’s
because of a reduction in mortgage lending activity, which I’ll discuss in a moment.
Overall, however, most of the positive trends we have been seeing in industry
performance continued in the third quarter. Fewer institutions reported quarterly losses,
lending grew at a modest pace, credit quality continued to improve, more banks came
off the “Problem List,” and fewer banks failed.
Revenue
Chart 2
As I noted, quarterly revenue declined because of lower mortgage lending and asset
sales gains.
This next chart shows that net operating revenue was 6.1 billion dollars lower than a
year ago. This decline was largely driven by the increase in medium- and long-term
interest rates that occurred in the second quarter. Higher interest rates have significant
effects on mortgage refinance and other activity, which we are now seeing in the third
quarter results.
Chart 2
As I noted, quarterly revenue declined because of lower mortgage lending and asset
sales gains.
This next chart shows that net operating revenue was 6.1 billion dollars lower than a
year ago. This decline was largely driven by the increase in medium- and long-term
interest rates that occurred in the second quarter. Higher interest rates have significant
effects on mortgage refinance and other activity, which we are now seeing in the third
quarter results.