Bank Earnings Hit 3-Year Low in 2nd Quarter

U.S. commercial bank earnings dipped sharply in the second quarter to their lowest level since 1997, prompting regulators to warn that “caution lights” are flashing for an industry that has been enjoying record profits in recent years. The Federal Deposit Insurance Corp. said commercial banks’ net income dropped to $14.7 billion from a record $19.5 billion in the first quarter as major restructuring expenses at large banks, losses on securities sales and sharply increased loan loss reserves weighed on profits. The report comes a day after the Office of the Comptroller of the Currency expressed concern about the level of risky loans in bank portfolios, saying fierce competition and earnings pressures may have led to slippage in lending standards in recent years.

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