Banks Achieve Fifth Consecutive Quarter of Record Profits Despite Existence of CUs

WASHINGTON – The Federal Deposit Insurance Corporation recently reported that banks had record earnings for the fifth quarter in a row. Contrary to banker cries that credit unions are taking away business from banks and thrifts, the 9,116 national banks and thrifts earned a $31.9 billion last quarter, up $858 million or 2.8% from the last quarter of 2003. The difference between first quarter last year and this year was $2.3 billion or an increase of 8%. Mortgage refinancings and investment securities drove earnings, but there was also a large decline in provisions for loan losses. “The strong economic recovery has directly contributed to the impressive earnings performance of the banking industry,” FDIC Chairman Don Powell, who has spoken out in favor of taxing banks’ non-profit competitors, said. “In turn, banks and savings institutions are in solid shape to make loans to America’s families and businesses.” Banks’ net interest income was up $1.1 billion (1.5%) from the previous quarter. Noninterest income and increased noninterest expense slowed overall growth; noninterest income still grew 3.2% to $1.7 billion, but was stymied by a $2.2 billion decline in servicing income. While credit unions’ return on assets was down from 0.99% at the end of last year to 0.90% at the end of the first quarter of 2004, banks’ ROA is near record highs at 1.38%. The record stands at 1.39% from the first quarter of 2003. “The credit union community accepts full responsibility for banks’ record profits since the bankers seem to turn to credit unions as the X factor for all their ills.” NAFCU President and CEO Fred Becker said. “Perhaps if banks could reach customer service ratings near the credit union level, then any discussion of market share might become be moot. Credit unions remain a very small piece of the financial services pie, but it seems that that piece is all that the banks are interested in or at least their Washington based trade associations.” “It’s a shame that we’re doing such nasty business to them,” CUNA Chief Economist Bill Hampel commented. “This just further shows the hypocrisy of the bankers’ attacks.Where’s the beef?” He continued, “The thing I found most remarkable in that piece in the American Banker this morning (June 1, 2004), one of the bankers.said that if they don’t fix the credit union taxation issue, it will be the end of the community banking industry.” -