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

DATE: THURSDAY, March 16, 1995                   TAG: 9503160055
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                  LENGTH: Medium

BANKS EARN RECORD $44.7 BILLION PROFIT

The nation's commercial banks posted a $44.7 billion profit last year, setting a record for the third straight year as they earned higher interest income with fewer bad loans.

Ricki Tigert Helfer, chairwoman of the Federal Deposit Insurance Corp., said Wednesday that the banking outlook for this year remains good, but added, ``It is difficult to imagine banks can sustain these extraordinary profits.''

The 1994 earnings were 3.7 percent above the $43.1 billion in profits in 1993. In 1992, earnings totaled $32 billion, which also was a record, the FDIC reported Wednesday.

The FDIC also reported that the nation's 2,152 savings and loans and savings banks earned $6.4 billion in 1994, down 6.3 percent from 1993. Fourth-quarter earnings totaled $1.7 billion, up $58 million from a year earlier but down $207 million from the previous three months.

Two savings institutions failed in the fourth quarter, bringing the 1994 total to four. There were eight failures in 1993.

For banks, interest income rose $7.3 billion as the institutions continued to increase their loan portfolios. At the same time, banks were forced to set aside $5.9 billion less for loan losses.

Loans increased 9.7 percent to $208.4 billion, the largest annual growth rate since loans grew by 14.5 percent in 1984. All categories grew except for real-estate construction and development lending.

Loan losses totaled $11.2 billion, the smallest since $10.8 billion in 1984.

Helfer noted that despite the dramatic loan growth, ``We have seen no weakening'' in the quality of the lending that led to bank failures in the late 1980s and early 1990s.

In fact, the FDIC reported only 11 bank failures last year, down from 42 in 1993 and the fewest since 10 banks failed in 1981. Still, the number of commercial banks declined from 10,592 to 10,450, caused mainly by mergers or consolidations.

The number of problem banks totaled 247 with combined assets of $33 billion, down from 426 with assets of $212 billion at the end of 1993.

Return on assets, a standard measure of profitability, slipped to 1.15 percent in 1994 from a record 1.20 percent in 1993. Still, it was the second highest full-year average return in the FDIC's 61-year history.

In the fourth quarter, industry earnings totaled $10.7 billion, up $1.9 billion from the final three months of 1993.

by CNB