The decrease in the number of loans may be one of the reasons why the bank industry is not at its best right now. There are about 22 banks that have already failed this year and there are a lot more that are at the risk of failing. According to the report of FDIC, the bank industry had its highest profit after the recession 3 years ago.
At present, only a few of the insured banks in the US are bringing the larger portion of the industry’s profit. These banks include Wells Fargo, Citigroup, Bank of America and JP Morgan Chase. They have covered a good $20.6 billion of the total $21.7 billion profit that was reported for the last quarter of 2010.
It was said that most of these companies were able to get through the difficult times with the help of low loan rates and assistance from government security money. Unfortunately, the rest of the other banks are still under pressure.
According to FDIC Chair Sheila Blair, one good way to start resolving this issue is for banks to dynamically lend more while we are at the moment of economic recuperation.
One factor that may have contributed to this predicament is the stagnant progress of the number of loans in the country which may also have impeded the growth of revenues.
In fact, it was very unfortunate that a total of 157 banks in the US have failed last year because of the recession and the problem with loan growth. There was about an estimated value of 21 billion dollars worth of insurance that was used.
Even though deposits are guaranteed up to $250,000 for each account and even with the presence of loss reserves, Sheila Blair encourages banks to review the fundamentals of loans to help them boost their revenues. This applies not only to larger banks like Wells Fargo but also to smaller, regional banks.
Tags: FDIC, Wells Fargo, low loan rates, Pictures, Recession, bank industry, featured
