FDIC: Banking sector hammered in Q3
* The banking sector earned a cumulative $1.7 billion in the third quarter, down 94% from $28.7 billion in the year-earlier quarter. That was the second-worst reading since Q4 1990 (behind Q4 2007). Almost six in 10 institutions reported a drop in profit, while about one in four reported a quarterly loss.
* Provisions for loan losses exploded to $50.5 billion from $16.8 billion a year earlier. Net Interest Margins (NIM) improved to 3.37% from 3.35% a year earlier, helping boost net interest income by 4.9% YOY. But noninterest income dropped 1.5%. Securitization income plunged by 33%, while gain on asset sales (other than loans) tanked 78.7%. Banks lost 588% more on the sale of foreclosed real estate than a year earlier.
* Net charge offs surged 156.4% to $27.9 billion in the quarter. First mortgage and closed-end second mortgage charge offs were up 423%, while real estate construction and development C-Os rose 744%. HELOC charge offs surged 306%. Commercial and Industrial COs rose 139%, while credit card COs climbed 37.4%. The quarterly CO rate rose to 1.42% from 0.57% a year earlier.
* Noncurrent loans and leases rose to $184.3 billion, up 122% YOY. The percentage of loans NCLs increased across the board, with closed end first and second mortgages leading the way at +14.3%. While loan loss reserves rose 8.1% in the quarter, bringing the ratio of reserves to toal loans and leases to a 13-year high of 1.95%, NCLs rose faster than reserves. Result: The coverage ratio of reserves to NCLs fell to 85 cents for ever $1 of NCLs -- the lowest level since Q1 1993.
* Nine institutions failed in the third quarter, the highest quarterly tally in 15 years. With $307 billion in assets, Wamu was by far and away the biggest failure in the quarter and the FDIC's 75-year history. The number of financial institutions on the FDIC's "problem list" jumped to 171 from 117, while the total assets of problem institutions climbed to $115.6 billion from $78.3 billion.