Banks Earn a Record $5.8 Billion

Commercial banks earned a record $5.8 billion in the third quarter, a dramatic turnaround from the second quarter, but the industry still faces its worst yearly profits since 1934, the government said today.

Rising interest rates and lower loan-loss expenses from the Latin American debt crisis led to the upturn in earnings from July through September. That followed a $10.6-billion loss in the second quarter, when banks set aside a record $21.2 billion to cover potential losses on loans to debtor nations.