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TheStreet Open House

Fewer US Banks Failing As Industry Strengthens

By MARCY GORDON

WASHINGTON (AP) â¿¿ U.S. banks are ending the year with their best profits since 2006 and fewer failures than at any time since the financial crisis struck in 2008. They're helping support an economy slowed by high unemployment, flat pay, sluggish manufacturing and anxious consumers.

As the economy heals from the worst financial crisis since the Great Depression, more people and businesses are taking out â¿¿ and repaying â¿¿ loans.

And for the first time since 2009, banks' earnings growth is being driven by higher revenue â¿¿ a healthy trend. Banks had previously managed to boost earnings by putting aside less money for possible losses.

Signs of the industry's gains:

â¿¿ Banks are earning more. In the July-September quarter, the industry's earnings reached $37.6 billion, up from $35.3 billion a year earlier. It was the best showing since the July-September quarter of 2006, long before the financial meltdown. By contrast, at the depth of the Great Recession in the last quarter of 2008, the industry lost $32 billion.

â¿¿ Banks are lending a bit more freely. The value of loans to consumers rose 3.2 percent in the 12 months that ended Sept. 30 compared with the previous 12 months, according to data from the Federal Deposit Insurance Corp. More lending fuels more consumer spending, which drives about 70 percent of economic activity. At the same time, overall lending remains well below levels considered healthy over the long run.

â¿¿ Fewer banks are considered at risk of failure. In July through September, the number of banks on the FDIC's confidential "problem list" fell for a sixth straight quarter. These banks numbered 694 as of Sept. 30 â¿¿ about 9.6 percent of all federally insured banks. At its peak in the first quarter of 2011, the number of troubled banks was 888, or 11.7 percent of all federally insured institutions.

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