FDIC Quarterly Banking Profile Shows Mixed Results

NEW YORK (TheStreet) -- Last Thursday, the Federal Deposit Insurance Corporation released the details of the FDIC Quarterly Banking Profile covering the first quarter of 2012. I consider the QBP as the balance sheet of the U.S. economy, and one of the most important data series there is.

Wall Street does not focus on the details of the QBP and I rarely see it on anyone's economic calendar.

I began studying the details of the QBP in the first quarter of 2006, which helped me predict the housing bubble and the Great Credit Crunch -- which in my judgment still exists in the U.S. economy.

The FDIC highlighted the positives; FDIC-insured financial institutions reported net income of $35.3 billion in the first quarter 2012. This was $6.6 billion (22.9%) better than the in the first quarter 2011, and the highest quarterly net income for the banking system since the second quarter of 2007.

This year-over-year improvement was helped by a boost in loan sales, and a reduction in loan-loss provisions, not on a pickup of typical banking business, namely real estate lending.

Some bad news is that total loan balances declined $56.3 billion, on writedowns of bad loans, tougher lending standards and by businesses not looking to borrow given today's economic uncertainties.

A lack of sustained loan growth is a clear sign that the Great Credit Crunch continues.

Here's a look at the asset categories I have focused on since the end of 2007, courtesy of the FDIC.

Since the end of 2007 the number of FDIC-insured financial institutions declined 1,227, or 14.4% to 7,307 from 8,534. This reflects mergers, banks turning in their licenses, and 438 bank failures. The FDIC List of Problem Banks fell to 772 in Q1 from 813 in Q4, but looking at the graph below, bank failures remain dangerously high, and have been above 700 since 2009.

I have had a long-standing prediction that 500 to 800 banks will fail before the Great Credit Crunch is over.

Total Assets grew right through the "official" recession growing by 6.8% to $13.93 trillion the end of Q1 2012.

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