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breaking news

John Glenn, the 'last true national hero,' dead at 95

US banks earn record $42.2B in 2nd quarter


By Marcy Gordon

AP Business Writer

WASHINGTON (AP) — U.S. banks earned more from April through June than during any quarter on record, aided by a steep drop in losses from bad loans.

The Federal Deposit Insurance Corp. says the banking industry earned $42.2 billion in the second quarter, up 23 percent from the second quarter of 2012. About 54 percent of U.S. banks reported improved earnings from a year earlier.

Banks’ losses on loans tumbled 30.7 percent from a year earlier to $14.2 billion, the lowest in six years. And bank lending increased 1 percent from the first quarter. Greater lending helps boost consumer and business spending, leading to more jobs and faster economic growth.

Still, the report shows that the largest banks continue to drive the industry’s profits while smaller institutions have struggled. Banks with assets exceeding $10 billion make up only 1.5 percent of U.S. banks. Yet they accounted for about 82 percent of the industry’s earnings in the April-June quarter.

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

Overall, FDIC Chairman Martin Gruenberg said the second-quarter results “show a continuation of the recovery in the banking industry.”

One concern is the recent spike in interest rates. Rates have risen since Chairman Ben Bernanke indicated this spring that the Federal Reserve could slow its bond purchases later this year, if the economy continues to show improvement. The bond purchases have kept long-term interest rates low.

Higher interest rates could have mixed impact on banks. On one hand, they make it more expensive for banks to borrow. But they also enable banks to charge more for loans.

Losses on loans fell to the lowest level since the third quarter of 2007.


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