
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, August 11, 1993                   TAG: 9308110066
SECTION: BUSINESS                    PAGE: B6   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

FDIC FUND OUT OF DEBT

Record bank profits and plummeting failures have allowed the fund insuring deposits to build up to $6.8 billion and repay the last of the money it borrowed from taxpayers.

The fund's balance, up from $1.2 billion three months ago and a $101 million deficit six months ago, is the best in three years, the Federal Deposit Insurance Corp. said Tuesday.

A year and a half ago, the fund was $7 billion in the red. And during the 1992 election campaign, many analysts predicted the new administration would confront a banking crisis.

"We have seen a remarkable turnaround of nearly $14 billion in just 18 months," said Andrew C. Hove Jr., acting chairman of the FDIC.

The fund, which began borrowing from the Treasury in 1991 and owed $15.1 billion by September 1992, repaid the final $2.5 billion, with interest, on Friday.

Hove attributed the recovery primarily to the improved condition of the banking industry, which has allowed the agency to reduce its reserve for future losses from $10.8 billion at the end of 1992 to $6.2 billion at the end of June.

During the first half of this year, only 23 banks with assets of $2.5 billion failed, compared with 66 banks with assets of about $20.1 billion during the 1992 period.

First-quarter industry profits hit a record $10.9 billion. Based on a survey of public earnings reports, the American Bankers Association is predicting a $9 billion profit in the second quarter and expects 1993 earnings to surpass the $32 billion record set in 1992.

James Chessen, the association's chief economist, complained that the FDIC still is overestimating its future losses. He said industry profits may decline somewhat after this year because of less favorable interest-rate conditions, but he predicted they would remain strong - more than $20 billion a year.

The FDIC is expecting 40 to 60 failures this year and has reduced its list of problem banks to 640, with $363 billion in assets, from 863 banks with $464 billion in assets six months ago and 1,090 banks with $610 billion 18 months ago.

But Hove said the FDIC would not cut the insurance premiums paid by banks until the fund reaches full strength, $1.25 for every $100 in deposits. The fund now has 35 cents for every $100 and likely will reach full strength in three to six years, he said.

Bert Ely, an Alexandria, Va., financial institutions consultant, predicted the fund would reach full strength sooner, by the end of 1995.

by CNB