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U.S. banks log $40.3B record quarterly profit

Led by giants such as Citibank, the nation’s

Led by giants such as Citibank, the nation’s banks reported their largest-ever quarterly profit, $40.3 billion in the first quarter. (April 13, 2012) Credit: Getty Images

U.S. banks earned more from January through March than during any quarter on record, buoyed by greater income from fees and fewer losses from bad loans.

The banking industry earned $40.3 billion in the first quarter, the Federal Deposit Insurance Corp. said Wednesday. That profit is the highest ever for a single quarter and up 15.8 percent from the first quarter of 2012, when the industry's profits were $34.8 billion.

Record profits show banks have come a long way from the 2008 financial crisis. But the report offered a reminder that the industry is still struggling to help the broader economy recover from the recession.

Only about half of U.S. banks reported improved earnings from a year earlier, the lowest proportion since 2009. The industry's growth is being driven by a narrower group of the nation's largest banks.

Those banks include Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. Most of them have recovered with help from federal bailout money and record-low borrowing rates.

Bank lending declined from the October-December quarter, although that drop-off followed several quarters of increases.

And bank profits from interest charged fell 2.2 percent to $104 billion. The industry's average interest income as a percentage of total loans on its books fell from 3.35 percent to 3.27 percent, the lowest portion of total loans in nearly seven years.

Banks have looked to boost revenue from fees, despite complaints from customers and consumer advocates.

FDIC chairman Martin Gruenberg said the banking industry "is in much stronger shape today than it was three years ago." But he added that "it's a fairly tricky environment for the industry" because of narrowing profit margins from charging interest and relatively weak demand for loans.

Another sign of the industry's health is that fewer banks are at risk of failure. The number of banks on the FDIC's "problem" list fell to 612 from 651 as of Dec. 31.

And so far this year, only 13 banks have failed. That follows 51 closures last year, 92 in 2011 and 157 in 2010. The 2010 closures were the most in one year since the height of the savings and loan crisis in 1992.

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