Bank Profits Hit Record in ‘94: $44.7 Billion : Finance: FDIC official expresses doubt that the ‘extraordinary’ earnings can continue.

The nation’s commercial banks posted a $44.7-billion profit last year, setting a record for the third straight year as they earned higher interest income with fewer bad loans.

Ricki Tigert Helfer, chairwoman of the Federal Deposit Insurance Corp., said Wednesday that the banking outlook for this year remains good, but added, “It is difficult to imagine banks can sustain these extraordinary profits.”

The 1994 earnings were 3.7% above the $43.1 billion in profits in 1993. In 1992, earnings totaled $32 billion, also a record, the FDIC reported Wednesday.

The FDIC also reported that the nation’s 2,152 savings and loans and savings banks earned $6.4 billion in 1994, down 6.3% from 1993. Fourth-quarter earnings totaled $1.7 billion, up $58 million from a year earlier but down $207 million from the previous three months.

Two savings institutions failed in the fourth quarter, bringing the 1994 total to four. There were eight failures in 1993.

For banks, interest income rose $7.3 billion as the institutions continued to increase their loan portfolios. At the same time, banks were forced to set aside $5.9 billion less for loan losses.

Loans increased 9.7% to $208.4 billion, the largest annual growth rate since loans grew by 14.5% in 1984. All categories grew except real estate construction and development lending.

Loan losses totaled $11.2 billion, the smallest since the $10.8 billion of 1984.

Helfer noted that despite the dramatic loan growth, “we have seen no weakening” in the quality of the lending that led to bank failures in the late 1980s and early 1990s.

In fact, the FDIC reported only 11 bank failures last year, down from 42 in 1993 and the fewest since 10 banks failed in 1981. Still, the number of commercial banks declined from 10,592 to 10,450, due mainly to mergers and consolidations.

The number of problem banks totaled 247, with combined assets of $33 billion, down from 426 and assets of $212 billion at the end of 1993.

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Bank Profits

Annual commercial bank profits, in billions of dollars:

1994: $44.7

Source: Federal Deposit Insurance Corp.