Weak Housing, Subprime Weigh on Bank Earnings

The weak housing market and risky subprime mortgages weighed heavily on the nation's banks and thrifts in the second quarter, a trend that looks to carry forward, according to an updated report by TheStreet.com Ratings.

The 8,698 banks and savings and loans covered by TheStreet.com Ratings reported $37.0 billion in net income for the second quarter, a decrease of 2.4% from June 2006. And while the Federal Reserve's Sept. 18 rate cut should help ease some of the pain by lowering interest rates, it probably comes too late to offset the prolonged effect a decline in residential real estate values and asset quality of bank loan holdings should have on earnings in the third quarter.

Problem loans are pressuring even the biggest financial institutions, which are showing an impact to their bottom line as they set aside more money in reserve to offset loan losses. For smaller banks and thrifts, the recent failures of NetBank and Miami Valley Bank serve as reminders of the importance of monitoring these institutions' financial health. ...