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Banks Earned Record Profits in 3rd Quarter : Finance: Lower premiums and stable interest rates helped the bottom line.

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From Times Wire Services

The banking industry posted record earnings of $13.8 billion in the third quarter, compared with $11.8 billion in the third quarter of 1994, the Federal Deposit Insurance Corp. said Wednesday.

The third quarter earnings were higher than the previous record of $12 billion in the second quarter, the FDIC said.

FDIC Chairman Ricki Helfer said the outlook for the banking industry “remains positive going forward.”

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The reduction of the premiums that banks pay for deposit insurance added about $1 billion to earnings in the third quarter, the FDIC said.

“The picture may be clouded by one small trouble spot--consumer lending--and even that spot is not a generalized problem,” she said.

The third quarter was the 11th consecutive quarter in which bank earnings exceeded $10 billion. Strong loan growth and stable net interest margins, along with reduced premiums, contributed to earnings in the third quarter, the FDIC said.

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The banking industry’s return on assets rose to a record 1.32% from 1.16% in the second quarter, and the return on equity set a record at 16.3%, Helfer said.

She added that the industry’s asset quality “in general, remains strong.”

The Bank Insurance Fund reached 1.31% of insured deposits at the end of the third quarter, and the Savings Assn. Insurance Fund was at 0.43%.

She also said her outlook for the fourth quarter for the industry was “quite positive.”

FDIC analyst Ross Waldrop told a news briefing that the fourth quarter was likely to be similar to the fourth quarter of 1994, when the industry posted $10.7 billion in earnings.

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In the fourth quarter, the premium reduction is expected to add about $800 million to earnings.

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