US bank earnings jumped up by 21% according to the Federal Deposit Insurance Corporation. The increase is equivalent to a net income of $34.5 billion in the second quarter of 2012 alone. It can be attributed to a better loan collection rate compared to that of last year.
The FDIC says that lenders set aside $14.2 billion for bad credit loans while the remaining $20.5 billion was dedicated to charge-offs. Charge-offs of this amount is the lowest quarterly total recorded for the last four years. This only goes to show that the US economy slowly gaining momentum towards a full recovery.
Which Banks Did Well This Year?
Wells Fargo & Co. has reported that they have experienced a 17% increase in earnings as of the second quarter of this year. The strengthening of mortgage banking has been the number one reason for its strength; and only made better by a decrease in operation expenses. The company’s statistics is supported by the nationwide claim of residential lending go up by almost 17 billion. Meanwhile, commercial and industrial loans remain to be at the top of the ladder when it comes to profit.
However, JPMorgan Chase & Co. has reported losses set at $5.8 billion and that certainly hurt the industry. This reported loss may have prevented the US bank earnings to skyrocket but at least it wasn’t enough to pull everything down.
In totality, 8 in every 10 banks have experienced higher bank earnings but have out aside lower reserves for loan losses. But according to the FDIC, although levels of troubled assets and institutions remain high, they are still showing great improvement.
But other than the traditional financing institutions, third party lenders are also seen to be doing very well. Online transactions have increased for bad credit loans following a better collection rate. Loan losses from unpaid bad credit loans may still be substantial but they are reportedly better than last year.
As for the saving rate, the pace of deposit has finally slowed down at approximately $62 billion in the last quarter. This is better compared to the $75 billion in the previous quarter. These figures only mean that consumers are getting back enough activity in the market. They are spending and that’s good news. Consumer spending makes up about 75% of the overall economy.
Since more money has been put out and is currently circulating, banks and financing institutions are expected to come up with better collection rates in the next year.