WASHINGTON, D.C – May 24, 2011 – (RealEstateRama) — “Today’s report shows that the banking industry continues to gain strength. For a year now, asset quality has steadily improved, loan losses have declined, and capital is at record highs. This forward momentum helps solidify the base for making new loans to bolster growth in the expanding economy. “Banks added nearly $25 billion in equity capital during the first quarter and total industry capital is now more than $1.5 trillion. Banks also have set aside more than $218 billion in reserves to cover possible loan losses. Capital plus reserves gives a total buffer protecting the industry of more than $1.7 trillion. This demonstrates strong industry-wide improvement and a continued build-up of underlying strength. In addition, the industry capital-to-assets ratio – a key measure of financial strength – continues to remain very strong and ended the quarter at an all-time high.
“The fact that lending declined is not surprising, given the tepid recovery. The housing market is still drowning in an oversupply of existing homes and buyers remain hesitant. Business lending did improve slightly, but loan demand remains exceptional weak. Businesses are reluctant to invest in new equipment or hire new workers due to the lack of confidence in the economy.
“The condition of borrowers seems to be improving, as seriously delinquent loans dropped to their lowest levels since second quarter 2009. In every loan category, the level of delinquent loans declined. In fact, non-current loans were down by $17 billion (4.7 percent) compared to last quarter.
“The number of banks on the FDIC’s list of troubled institutions has stabilized. This reflects the fact that parts of the country are still recovering from the recession. Importantly, the FDIC continues to revise downward the expected cost of failures. The banking industry, which pays the full cost of any bank failure, is committed to maintaining the strength of the deposit insurance fund. Each depositor is fully insured up to $250,000, and there is full protection for non-interest bearing transaction accounts through the end of 2012. In the 78-year history of the FDIC, no depositor has ever lost a penny of insured deposits.
“Navigating the ups and downs of the economy is nothing new to banking. Nearly 5,000 banks – or 64 percent – have been in business for more than 50 years, and one out of three banks has served its local community for more than a century. This demonstrates the staying power of banks and their commitment to serve local communities.”
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The American Bankers Association represents banks of all sizes and charters and is the voice for the nation’s $13 trillion banking industry and its two million employees. Learn more at aba.com.
ABA Media Contact: John Hall
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