By Paula Dwyer
Desperate for some positive economic news? Read this: Today's quarterly report from the Federal Deposit Insurance Corp. shows that banks' finances are improving, the number of troubled banks is declining, bank lending is on the rise and the deposit-insurance fund is positive for the first time in two years.
The FDIC keeps a confidential list of troubled banks -- institutions at risk of collapse. The latest tally counts 865 of the country's 7,513 banks, down 23 from the first quarter of 2011 and the first decline since 2006. The main reason for the turnaround is that banks had set aside $20.9 billion less for nonperforming loans and write-offs. The drop was the largest since the recovery began.
Adding to the upbeat trend, banks posted their eighth consecutive profitable quarter. And the number of second-quarter bank failures -- 22 versus 26 in the first quarter -- fell for the fourth quarter in a row. That's the smallest number of failures since the first quarter of 2009. Over the first six months of the year, 48 institutions failed, compared with 86 in the first half of 2010. The deposit-insurance fund's balance is also positive for the first time in two years.
While the regulator cautioned that banks still face serious headwinds, possibly the best news of all is that loan portfolios grew for the first time in three years. Total loans and leases increased by $64.4 billion, or 0.9 percent. Loans to commercial and industrial borrowers increased by $34.3 billion. Auto loans rose by $9.7 billion. And credit card balances grew by $5.2 billion. While lending remains far from normal, can the great American deleveraging finally be coming to an end?
(Paula Dwyer is a member of the Bloomberg View editorial board.)-0- Aug/23/2011 16:24 GMT