Growing late payments to banks, thrifts
The increase of 10.6% in the second quarter was called the largest in the U.S. in 17 years.
U.S. banks and thrifts reported the biggest increase in late loan payments in 17 years as more homeowners fell behind on mortgages, the Federal Deposit Insurance Corp. said yesterday.
Loans more than 90 days past due rose 10.6 percent to $66.9 billion in the period ended June 30, the largest quarterly increase since 1990 and the fifth quarter of growth in a row, the FDIC said in its Quarterly Banking Profile, released yesterday.
"The bottom line for banks is that the credit environment continues to be more challenging now than it has been in recent years," FDIC Chairwoman Sheila Bair said during a news briefing at the agency's Washington headquarters.
The report reflects the growing strain that lenders are experiencing as the collapse of the subprime-mortgage market roils the banking industry. At least 90 U.S. mortgage companies have halted operations or seeking buyers since the start of 2006, according to Bloomberg data.
Residential mortgage loans 90 days delinquent increased 12.6 percent to $27.5 billion in the second quarter from $24.4 billion in the first quarter.
"Current conditions do underscore that regulators must be vigilant and banks need to follow sound risk-management practices," Bair said.
Still, she said, the banking industry is well-capitalized, profitable, well-diversified, and "in a very good position as we are going through this period of market readjustment."
Lenders set aside $11.4 billion for potential loan losses in the second quarter, up 75 percent from a year earlier and the most since the fourth quarter of 2002.
The amount lenders wrote off for bad loans grew 51.2 percent to $9.16 billion in the second quarter from $6.06 billion in the second quarter of 2006.
Insured banks and thrifts reported $36.7 billion in net income for the quarter, a decline of 3.4 percent from $38 billion a year earlier.