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2012 real estate nonperforming loan investor survey - Banks continue to improve - EY - Global

2012 real estate nonperforming loan investor survey

Banks continue to improve

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Bank quaterly earnings trend

 
Source: FDIC Quaterly Banking Report 

In 2011, the number of bank failures dropped to 92, down from 157 failed banks in 2010.

Look at the US banking industry as a whole, and you see a picture of continuing recovery. However, look at the CRE loans on the balance sheets of US banks, especially smaller banks, and you see risks to the recovery — and reasons why banks might want to sell distressed CRE loans.

But first, the big picture. By many benchmarks, US bank performance continues to improve.1

  • Profits are up. Insured banks and savings institutions earned US$35.3 billion in Q3 2011, or about as much as they lost in Q4 2008 at the depths of the US recession and financial crisis. While the banks’ Q4 2011 earnings were not available as this report went to press, banks were expected to have a second consecutive year of profits in 2011. In 2010, bank profits totaled US$83.7 billion, compared with a revised loss of US$18.1 billion in 2009.
  • Loan loss reserves decline. Banks have returned to profitability largely as a result of reducing their loan loss provisions, which fell to US$18.6 billion in Q3 2011 from US$35.1 billion a year earlier.
  • Net loan charge-offs drop. In addition, banks’ net loan charge-offs declined to US$26.7 billion in the third quarter from US$43.9 billion a year earlier. The largest banks have accounted for much of the reduction in loan loss reserves and charge-offs.
  • Non-current loans fall. Another positive sign is that non-current loans on the banks’ books declined to US$309.6 billion in the third quarter from US$ 377.2 billion a year earlier.
  • Bank failures decline. In 2011, the number of bank failures dropped to 92, down from 157 failed banks in 2010. The 2010 statistic was not only more than the 140 failures in 2009, it was the largest number of failures in nearly 20 years.
  • Number of “problem banks” declines. The number of FDIC-designated problem banks declined to 844 at the end of Q3 2011 from 884 at the end of the previous year. At the end of Q3 2011, the assets of problem banks declined to US$339 billion from US$390 billion at the end of the previous year.

Bank quaterly earnings trend

 
Source: FDIC Quaterly Banking Report 



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1 “Quarterly Banking Profile: Third Quarter 2011,” FDIC Quarterly, FDIC, 2011.

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