Banks Earn $100 Billion Post-Crisis Profit

NEW YORK ( TheStreet) -- U.S. banks and thrifts earned $26.3 billion during the fourth quarter and $119.5 billion in earnings for 2011, the industry's best annual performance since 2006, according to a Federal Deposit Insurance Corp. statement issued Tuesday

When combined, U.S. banks and savings and loan associations earned $145.2 billion.

Of course, at this point in the credit cycle, the release of loan loss reserves continues to pad earnings. The 19 commercial banks (not holding companies) with total assets of $100 billion as of Dec. 30 saw their allowances for loan losses decline by $4.9 billion during the fourth quarter, according to data provided by HighlineFI, directly boosting bottom-line results.

For all of 2011, the group of 19 released $28.3 billion in reserves.
  • Citibank, NA -- the main banking subsidiary of Citigroup (C) -- saw its allowance for loan losses decline by $8.4 billion during 2011, adjusting for the merger of Citibank (South Dakota) N.A. into Citibank, NA, on July 1. Citibank, NA had $24.7 billion in loan loss reserves as of Dec. 30.
  • Bank of America (BAC) subsidiary FIA Card Services, NA released $7.4 billion in loan loss reserves during 2011. Meanwhile, the company's larger subsidiary Bank of America, NA, released only $542.5 million in reserves during 2011, as the subsidiary was saddled with problem mortgage loans.
  • Wells Fargo Bank, NA -- the main banking subsidiary of Wells Fargo (WFC) -- released $3.3 billion in reserves. The holding company's returns on average assets (ROA) have ranged from 1.11% to 1.27% over the past five quarters, for the steadiest and strongest performance among the "big four" U.S. bank holding companies.
  • JPMorgan Chase's (JPM) main banking subsidiary JPMorgan Chase Bank, NA, released only $928 million in reserves during 2011. The company's smaller Chase Bank USA, NA subsidiary saw its allowance for loan losses declined by $2.4 billion during 2011.

The FDIC said that the industry's earnings posted their 10th straight year-over-year gain, and that "almost two out of every three banks (63.2 percent) reported higher quarterly net income than a year ago, and only 18.9 percent were unprofitable, compared with 27.1 percent in fourth quarter 2010."

The industry's ROA was 0.76% during the fourth-quarter, increasing from 0.64% a year earlier.

Industry revenue continued to show weakness, which was no surprise, with the Federal Reserve in the fourth quarter implementing rules required by the Durbin Amendment to the Dodd Frank Wall Street Reform and Consumer Protection Act, which set a cap on interchange fees large banks charge merchants to process debit card purchases.

The aggregate fourth-quarter noninterest income for all U.S. banks and thrifts totaled $54.9 billion, declining 7% from a year earlier. Meanwhile, net interest income rose 1% to $107.1 billion in the fourth quarter.

The aggregate net interest margin -- the difference between a bank's average yield on loans and investments and its average cost for deposits and borrowings -- continued to be pressured in the prolonged low-rate environment, narrowing to 3.57% during the fourth quarter, from 3.71% a year earlier.

Asset quality continued to improve for a seventh-straight quarter, with noncurrent assets and repossessed real estate making up 2.55% of total assets as of Dec. 30, compared to 3.11% at the end of 2010.

In a hopeful sign for the industry, the FDIC said that aggregate loan balances had posted their "largest real growth in four years," as loan balances grew by $130.1 billion, or 108%, during the fourth quarter, for the third consecutive quarter of industry loan growth.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.
Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.