Opening Statement
Of
John Reich
Vice Chairman
Federal Deposit Insurance Corporation
At a Press Conference
Announcing Bank Earnings for the Third Quarter 2002
Washington, D.C.
November 26, 2002
FOR IMMEDIATE RELEASE Media Contact:
PR-124-2002 (11-26-02) David Barr (202) 898-6992
Good morning, I am John Reich, Vice Chairman of the Federal Deposit Insurance
Corporation, and I want to welcome you to this press conference announcing earnings
figures for the commercial banking industry in the third quarter of this year.
Banks earned $23.4 billion in the quarter -- $11 million less than the record set in the
previous quarter. So far this year, the industry has earned $68.5 billion, compared to the
$74.7 billion banks earned in all of 2001. The industry's ROA is 1.37 percent, compared
to 1.17 percent for the first three quarters of last year. Almost three out of every four
banks have reported improved year-to-date earnings, primarily because of higher net
interest income.
For reasons I'll touch on momentarily, the ride became a little bumpier - particularly for a
few large institutions - in the third quarter, but the industry as a whole enjoyed near
record earnings. It remains well positioned to continue to be an engine of growth for the
economy.
Profits in the third quarter were held back by foreign operations. Income from
international operations fell almost 60 percent. That decline compares to a 5.5 percent
rise in income from domestic operations in the third quarter - though much of that
improvement came from nonrecurring items, such as securities sales, rather than in
revenues from ongoing operations. Even so, net operating income grew almost 22
percent in the first nine months of 2002 compared to the same period in 2001.
Earnings in the third quarter were also held down by higher expenses for loan losses,
among other factors. Those higher loan losses were concentrated among the larger
banks. Because of these losses, as well as lower revenues from market-related
activities, five of the 10 largest commercial banks had lower earnings in the third quarter
than in the second quarter. Another weak spot at large banks is the quality of their
commercial and industrial loans. The industry's noncurrent rate on C&I loans topped
three percent for the first time since 1993 - with virtually all the increase occurring in
Of
John Reich
Vice Chairman
Federal Deposit Insurance Corporation
At a Press Conference
Announcing Bank Earnings for the Third Quarter 2002
Washington, D.C.
November 26, 2002
FOR IMMEDIATE RELEASE Media Contact:
PR-124-2002 (11-26-02) David Barr (202) 898-6992
Good morning, I am John Reich, Vice Chairman of the Federal Deposit Insurance
Corporation, and I want to welcome you to this press conference announcing earnings
figures for the commercial banking industry in the third quarter of this year.
Banks earned $23.4 billion in the quarter -- $11 million less than the record set in the
previous quarter. So far this year, the industry has earned $68.5 billion, compared to the
$74.7 billion banks earned in all of 2001. The industry's ROA is 1.37 percent, compared
to 1.17 percent for the first three quarters of last year. Almost three out of every four
banks have reported improved year-to-date earnings, primarily because of higher net
interest income.
For reasons I'll touch on momentarily, the ride became a little bumpier - particularly for a
few large institutions - in the third quarter, but the industry as a whole enjoyed near
record earnings. It remains well positioned to continue to be an engine of growth for the
economy.
Profits in the third quarter were held back by foreign operations. Income from
international operations fell almost 60 percent. That decline compares to a 5.5 percent
rise in income from domestic operations in the third quarter - though much of that
improvement came from nonrecurring items, such as securities sales, rather than in
revenues from ongoing operations. Even so, net operating income grew almost 22
percent in the first nine months of 2002 compared to the same period in 2001.
Earnings in the third quarter were also held down by higher expenses for loan losses,
among other factors. Those higher loan losses were concentrated among the larger
banks. Because of these losses, as well as lower revenues from market-related
activities, five of the 10 largest commercial banks had lower earnings in the third quarter
than in the second quarter. Another weak spot at large banks is the quality of their
commercial and industrial loans. The industry's noncurrent rate on C&I loans topped
three percent for the first time since 1993 - with virtually all the increase occurring in
loans to domestic borrowers. Also, charge-offs of credit-card loans totaled $3.9 billion in
the third quarter - more than a third higher than a year ago.
These areas of weakness - international operations, large corporate borrowers, and
credit cards - are mostly centered in larger banks. The vast majority of community
banks have not been subject to these problems.
All that being said, bank profitability remains strong. Demand for consumer loans,
especially residential mortgages and home equity loans, grew. In short, we see no
systemic concerns.
Attachment: FYI - Quarterly Banking Profile - Commercial Banking Performance, Third
Quarter 2002
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public
confidence in the nation's banking system. The FDIC insures deposits at the nation's
9,480 banks and savings association and it promotes the safety and soundness of
these institutions by identifying, monitoring and addressing risks to which they are
exposed. The FDIC receives no federal tax dollars-insured financial institutions fund its
operations. FDIC press releases and other information are available on the Internet at
www.fdic.gov or through the FDIC's Public Information Center (800-276-6003 or (703)
562-2200).
Last Updated 11/26/2002
the third quarter - more than a third higher than a year ago.
These areas of weakness - international operations, large corporate borrowers, and
credit cards - are mostly centered in larger banks. The vast majority of community
banks have not been subject to these problems.
All that being said, bank profitability remains strong. Demand for consumer loans,
especially residential mortgages and home equity loans, grew. In short, we see no
systemic concerns.
Attachment: FYI - Quarterly Banking Profile - Commercial Banking Performance, Third
Quarter 2002
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public
confidence in the nation's banking system. The FDIC insures deposits at the nation's
9,480 banks and savings association and it promotes the safety and soundness of
these institutions by identifying, monitoring and addressing risks to which they are
exposed. The FDIC receives no federal tax dollars-insured financial institutions fund its
operations. FDIC press releases and other information are available on the Internet at
www.fdic.gov or through the FDIC's Public Information Center (800-276-6003 or (703)
562-2200).
Last Updated 11/26/2002