FDIC Predicts Fewer Bank Failures in 1993 : Finance: Federal regulators say the total in failed assets will reach $10 billion, lowest since 1987.

Record bank profits have prompted regulators to predict the lowest level of bank failures this year since 1987.

The Federal Deposit Insurance Corp. said last week that banks with $10 billion in assets probably would slip into insolvency this year. Only three months ago, the agency was expecting assets in failed banks to total $25 billion. Six months ago, the prediction was 100 to 125 banks with $76 billion in assets.

The new projections are coming after record banks profits, caused in part by an extremely wide--and probably temporary--gap between the short-term interest rates banks pay to depositors and the longer-term rates they earn on loans and other investments.

“Many banks that just a few months ago appeared weak and at risk of closing now have been merged or have been able to increase their capital levels,” acting FDIC Chairman Andrew C. Hove Jr. said.

However, he warned, “We also must remain cautious because if the current favorable conditions for banking turn unfavorable, that could have an adverse impact on the industry and on the insurance fund.”

The agency does not officially predict failures by number, but an official who asked not to be identified said $10 billion in assets could amount to roughly 60 to 72 banks, down from 122 failures with $44.2 billion in assets last year.

If that projection is realized, it would be the best year for failures in terms of assets since 1987 when failed banks held $9.2 billion in assets. It would be the best in terms of numbers since 1983 when 48 banks failed.

From Jan. 1 through Wednesday, 22 banks with $2.7 billion in assets failed, down from 61 banks with $19.9 billion in assets during the same period of 1992.

In 1994, the FDIC is projecting banks with $25 billion in assets will fail, down from its prediction three months ago of $45 billion.

James Chessen, chief economist of the American Bankers Assn., applauded the reduced failure projection but said it could probably be cut by an additional third.

“It’s very good they’ve come down to earth, or close to earth, on their estimates,” he said.

Even allowing for the more conservative government figures, Chessen said the FDIC’s insurance fund for bank deposits would be back at full strength--$1.25 for every $100 in deposits--by 1997.