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Why Bank of America, Citi, JPMorgan, Wells Fargo Still Face Hurdles



NEW YORK (TheStreet) -- The Federal Deposit Insurance Corp. released its Quarterly Banking Profile Thursday. This balance sheet for the U.S. economy showed total assets in the banking system rose by 5.3% year over year in the second quarter to $15.16 trillion.

Also Thursday, the Bureau of Economic Analysis reported its second read for GDP growth for the second quarter, and the annual rate was up solid 4.2%.

An important statistic to track is the total assets for the banks that are considered "too big to fail." These four money center banks control 44% of the total assets in the banking system.

Bank of America's (BAC - Get Report) total assets slipped 0.6% in the second quarter to $1.643 trillion, 11% of the total.

Citigroup's (C - Get Report) total assets increased 1.1% to $1.353 trillion, 9% of the total.

The biggest of the big, JPMorgan Chase (JPM - Get Report) , gained 1.6% in total assets to $2.105 trillion, 14% of the total.

Wells Fargo's (WFC - Get Report) total assets increased by 3.6% in the second quarter to $1.436 trillion, 10% of the total.

Even with improved balance sheets these banks still face economic hurdles. Here's why:

Reduced Mortgage Activities. The big banks have been cutting their mortgage activities and this contributed to a $3.6 billion year-over-year decline in noninterest income.

Trading Income has been declining for four consecutive quarters down by $721 million, or 10%.

Exposures to Notional Amount of Derivatives. The seven largest banks control 98% of the $239.2 trillion in notional amounts of derivative contracts.

Assessments for the Deposit Insurance Fund. The bigger banks face larger assessments than the smaller banks. The DIF balance rose to $51.1 billion at the end of the second quarter. The FDIC is mandated by law is to increase the minimum DIF balance to a reserve ratio of 1.35% of insured deposits by September 2020. Insured deposits are at $6.109 trillion. If the law was in effect today the DIF would have to be at least $82.5 billion.

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