Quarter Net Income Dips Slightly; Asset Quality Worsens
This document is based
on publicly available information provided by the companies it
covers. It is intended for informational purposes only and
does not represent official policy or supervisory guidance
from the FDIC.
August 8, 2002
The 25 largest banking companies (25 Largest)
earned $14.7 billion in the second quarter of 2002, according to recently
filed public data releases. High net interest margins and an increase in
loan volume contributed to strong earnings which produced a
return-on-assets of 1.25 percent for the group. Net income was 33 percent
higher than year-ago levels, but 9.1 percent lower than reported in the
first quarter of 2002. Credit quality problems continued at these
institutions, with chargeoffs rising 9.1 percent in the first quarter to
$7.5 billion and nonperforming assets rising 5.4 percent to $39.3 billion.
A detailed discussion of overall results and information on individual
companies are available in the FDICs report, Twenty-Five
Largest Banking Companies.
The results indicate that overall large-bank earnings have remained
strong in spite of the adverse effects of the recession that began in
March 2001. While the signs of economic recovery suggest that overall
credit quality may improve in future quarters, there remain several areas
of concern. These include continued high rates of corporate bankruptcies
and controversy over accounting and corporate governance issues, credit
exposures in Latin America, and higher-than-expected losses in subprime
portfolios. However, the resilient second-quarter financial performance of
the 25 Largest bodes well for their ability to manage credit events
that may accompany a challenging economic environment.