Skip to main content

NEW YORK (MainStreet) -- U.S. government data shows banks made more money in the first quarter, and suffered fewer shutdowns, than at any time in years. That's good news for banks, but what does it mean for consumers?

Fresh number from the Federal Deposit Insurance Corporation, via its Quarterly Banking Profile, shows that the banking industry posted total profits of $35 billion for the first quarter of 2012, the best profit level for the sector since 2007.

In addition, the total number of U.S. banks at risk of failure fell from 813 to 772 during the quarter, the lowest level since 2009. And only 16 banks actually crossed the threshold and failed, the lowest number of bank failures since 2008, the FDIC reports.

The U.S. banking industry continues to show signs of emerging from the recession.

"The condition of the industry continues to gradually improve," noted Martin Gruenberg, the FDIC's acting chairman in a release. "Insured institutions have made steady progress in shedding bad loans, bolstering net worth and increasing profitability."

There was one sour note from the FDIC report. "The overall decline in loan balances is disappointing after we saw three quarters of growth last year. But we should be cautious in drawing conclusions from just one quarter," the FDIC chairman said.

That all sounds promising for banks and the investors who make money off the success of financial stocks, but does it translate into good news for bank customers?

Maybe not.

Take interest rates, the money bank savers get from putting cash into checking accounts, money market accounts, and into certificates of deposit (CDs).

Scroll to Continue

TheStreet Recommends

According to the BankingMyWay national bank interest rate tracker, bank rates remain low even as financial institutions increase profits. 

Here’s a look at the BMW index, and how bank interest rates remain at historic lows:

This week's interest checking rate is 0.068%; the money market rate is 0.146%; the savings rate is 0.105%; and the 12-month CD is 0.287%.

As the BMW chart shows, the needle has barely moved on bank rates, as both banks and the Federal Reserve are waging what some like to call a “war on savers.”

Back when the Great Recession started in 2008, the Fed immediately launched a “recovery” campaign based on low interest rates. The thinking was that low rates would cause consumers to pursue credit and loans, and spend money to relaunch the economy.

The rates were low, for sure, but banks didn’t co-operate, only granting loans to consumers with golden credit. Conversely, they kept bank savings rates low, knowing that anxious investors would seek “safe havens” where they were guaranteed not to lose money.

What that kind of demand, banks could easily keep rates low, saving them more money, while penalizing bank savers.

That’s largely been the case for the past four years, but any signs of growth in the economy, and in the banking sector, should have consumers asking their financial institutions “you’re making money again . . . what about me?”

Increasingly, that’s a question bank consumers should be asking right now based on the latest FDIC bank profit numbers.