NEW YORK ( Forbes) -The nation's banks took in nearly $120 billion in net income last year, the most since 2006, but that doesn't mean they are back in their glory days. The Federal Deposit Insurance Corporation (FDIC) is out with its quarterly report on bank earnings and says banks and savings institutions reported an aggregate profit of $26.3 billion in the fourth quarter of 2011, a $4.9 billion jump from the $21.4 billion in net income the industry reported in the fourth quarter of 2010. FDIC Acting Chairman Martin J. Gruenberg said that "2011 represented the second full year of improving performance by the banking system. Banks reported higher positive aggregate earnings, the numbers of 'problem' banks and failures declined, and loan balances increased in the final three quarters of the year."
By Halah Touryalai, Forbes Staff
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"Fourth-quarter loss provisions totaled $19.5 billion, about 40 percent less than the $32.7 billion that insured institutions set aside for losses in the fourth quarter of 2010."That's great because banks are likely expecting fewer customers to default, for instance. What's not great is the following:
"Net operating revenue (net interest income plus total noninterest income) was $3.8 billion (2.3 percent) lower than a year earlier, due to a $4.4 billion (7.4 percent) decline in noninterest income."That's the third time in the last four quarters net operating revenue has dropped. Further full-year net operating revenue declined for only the second time since 1938-the only other decline occurred in 2008. That means banks are having a tough time making money off the loans they make, the most basic of bank activities. So those huge profits are not telling the whole story. There's a bigger issue here and that's the banking industry's revenue problem as interest rates remain at low levels.