FDIC Banking Profile Finds Bad News Everywhere

Not that anyone expected otherwise, but the recently issued Quarterly Banking Profile from the FDIC is a banker’s dozen of bummers (that’s 11 rather than 12 — interest taken out beforehand). The worst news for the first quarter of 2008 is that bank profits are down 46 percent to $19.3 billion, down from $35.6 billion during the same period last year.

The bulk of the difference stems from increased loan-loss provisions — money set aside for loan defaults:

FDIC-insured commercial banks and savings institution set aside $37.1 billion in loan-loss provisions during the quarter, more than four times the $9.2 billion set aside in first quarter 2007. Provisions absorbed 24 percent of the industry’s net operating revenue (net interest income plus total noninterest income) in the quarter, compared to only 6 percent in the first quarter of 2007.

Though it’s not much solace, this quarter’s revenues outperformed the fourth quarter of 2007, which boasted the lowest revenue numbers in 16 years and $10.6 billion in trading losses, due to similarly high loan-loss provisions and sharply higher noninterest expenses.

The other low point for the first quarter was the growth of the FDIC’s “problem list” of high-risk banks, which has risen from 76 in the fourth quarter of 2007 to 90 this year. It’s the highest number of problem institutions since the third quarter 2004. Here’s the FDIC’s definition:

“Problem” institutions are those institutions with financial, operational, or managerial weaknesses that threaten their continued financial viability.

The only good news? “Deposits at insured institutions increased by $150.4 billion (1.8 percent) during the quarter,” the report states. People started saving after the recession became all too apparent? Who’da thunk.