U.S. Banks’ Credit Crisis Troubles Likely to Continue
- May 30, 2008
Washington, D.C.–U.S. banks earmarked a record $37.1 billion to cover losses on real estate loans and other credits in the first quarter–an indication that the credit crisis is continuing to cause global economic troubles, the Financial Times said Friday.Loan-loss provisions and bank failures are likely to increase in the next few quarters as the credit crisis affects the real economy, Federal Deposit Insurance Corporation chairwoman Sheila Bair said.”While we may be past the worst of the turmoil in financial markets, we’re still in the early stages of the traditional credit crisis you typically see during an economic downturn,” she said. “What we really need to focus on is the uncertainty surrounding the economy … and again, it is all about housing.”The FDIC’s quarterly banking profile found first quarter loan-loss provisions were more than four times higher than in 2007–which caused bank earnings for FDIC-insured commercial bank and savings institutions to drop 46 percent to $19.3 billion.The Washington, D.C.-headquartered FDIC revised the industry’s fourth quarter 2007 net income to $646 million from $5.8 million–the lowest level since 1990. In addition, the number of “problem” banks increased in the first quarter from 76 to 90, according to the FDIC. This year, three U.S. banks have failed thus far; only three failed during all of 2007, and none failed in 2005 or 2006, the Times said.