Financial Industry: Big Profits . . . For Now

  • Share

Last year's dismal recession produced at least one major surprise. Banks and savings and loans actually managed to pull off one of their best performances in years. The Federal Deposit Insurance Corporation reported last week that the commercial banking industry earned $18.6 billion in 1991, up 16% from the previous year and the largest profit since 1988. And the Office of Thrift Supervision said the S&L industry posted earnings of $1.97 billion, the first gain in five years. The thrifts lost $2.9 billion in 1990.

But don't uncork the champagne yet. Experts believe much of these gains came from one-time factors. Handsome profits from the decline in interest rates last year allowed institutions to pay depositors rates as low as 3% while charging borrowers more than double that level. Now that rates are creeping up again, that windfall may be ending.

Another worrisome development: delinquent real estate loans are surging in the pricey West Coast market. Thus the problems that have plagued much of the Northeast last year are now spreading to large California banks and thrifts. Many experts fear that one or more of the nation's largest banks on the West Coast are in danger of collapsing in the next several months.

Time.com on Digg

POWERED BY digg

Quotes of the Day »

WHITE HOUSE OFFICIAL, on a Nigerian man who tried to ignite an explosive device aboard a Northwest Airlines flight to Detroit Friday; officials say he wanted to bring the plane down but his attempt failed
For use in rail of Articles page or Section Fronts pages. Duplicate and change name as necesssary to distinguish.