Bank Profits Reach Record High But Losses On Credit Cards Also Set A Record During Second Quarter

Profits at the nation’s commercial banks rose to a record $14.6 billion in the second quarter despite hefty losses on credit-card loans, the government reported Thursday.

The strong economy continued to boost the banking industry, with earnings in the April-June period jumping 5.8 percent from $13.8 billion in the second quarter of 1996, the Federal Deposit Insurance Corp. said.

FDIC Chairman Andrew Hove said the strong performance resulted in large part from a surge in lending growth, especially for commercial and industrial loans.

“We have enjoyed 18 consecutive quarters - four-and-a-half years - where quarterly profits have exceeded $10 billion,” Hove said.

At the same time, he noted, the record rate of losses on credit cards in the second quarter continued to parallel the high level of personal bankruptcies. Losses on credit-card loans accounted for two-thirds of all loan losses reported by commercial banks during the quarter, according to the FDIC.

Banks declared as uncollectible an annualized 5.22 percent of credit card balances in the second quarter, up from 4.48 percent a year ago. That is the highest quarterly rate for credit-card loans in the 14 years that banks have reported such data, the FDIC said.

The losses have been especially hard on banks that specialize in credit card lending. Of the 74 such institutions in the country, 35 reported declining income in the second quarter, the FDIC said.

Fourteen of the 74, some of them subsidiaries of larger banks, lost money.

The federal agency that supervises savings and loans recently reported that 95.7 percent of the thrifts were profitable in the second quarter - the highest for any quarter since such data were first collected in 1984 and the first time it exceeded 95 percent. Earnings totaled $1.69 billion, down from a record $1.9 billion a year earlier, reflecting higher tax payments.