The nation's banks turned a profit in the first quarter, but the number of problem banks jumped to more than 300, the government said Wednesday.
The Federal Deposit Insurance Corp. said higher trading revenues at big banks helped the industry earn a $7.6 billion profit in the January-March period, compared with a record loss of $36.9 billion in the fourth quarter. The profit was 61 percent below the $19.3 billion earned in the year-ago period and followed the first quarterly loss in 18 years.
U.S. banks and thrifts set aside $60.9 billion in the first quarter to cover potential loan losses, up from $36.2 billion a year earlier.
The number of troubled banks jumped to 305, the highest number since 1994 during the savings and loan crisis, from 252 in the fourth quarter, according to the FDIC.
Thirty-six federally insured institutions already have failed and been shut down by regulators this year, extending a wave of collapses that began in 2008. This year's tally compares with 25 in all of 2008 and three in 2007.
The failures sliced the amount in the deposit insurance fund to $13 billion in the first quarter, the lowest level since 1993. That compares with $17.3 billion a year earlier.
"Troubled loans continue to accumulate" and the costs to banks from soured loans "are weighing heavily on the industry's performance," FDIC Chairman Sheila Bair said. "Nevertheless, compared to a year ago, we see some positives."
Those include the increase in banks' net interest income and revenue from sources other than interest such as trading, she said.
The first-quarter results "are telling us that the banking industry still faces tremendous challenges," Bair said.
The FDIC projects U.S. bank failures will cost the deposit insurance fund around $70 billion through 2013.
The FDIC on Friday adopted a new system of emergency fees paid by U.S. financial institutions that will shift more of the burden to bigger banks to help replenish the insurance fund. The move by the agency cut by about two-thirds the amount of special fees to be levied on banks and thrifts compared with an earlier plan, which had prompted a wave of protests by small and community banks.
The new system is intended to raise about $5.6 billion. Additional emergency assessments could come later in the year, the FDIC said.
Congress last week more than tripled the amount the FDIC could borrow from the Treasury Department if needed to restore the insurance fund, to $100 billion from $30 billion. Bair had earlier promised a reduction in fees charged to banks if that credit line could be expanded.
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