Bank Profits and Balance Sheets Show Mixed Progress in 2009
U.S. commercial banks and nondeposit trust companies continued to face significant challenges in 2009, according to a May article in the Federal Reserve Bulletin. Among the challenges were deteriorating asset quality, a decline in lending activity, and a growing list of troubled banks and bank failures, said the article, which used call report data to review banking conditions during the previous year.
Profitability, lending decline across industry
Bank balance sheets contracted sharply in 2009 as banks' raised capital and nominal assets declined on an annual basis for the first time since 1948. Loans outstanding decreased in all categories, but the decline was especially marked in loans to businesses. Indeed, commercial and industrial (C&I) loans on bank books fell nearly 19 percent last year, the biggest decline in at least 25 years, said the report. Several factors contributed to the decline in lending, including deteriorating asset quality among potential borrowers, tighter lending standards and terms, and lower demand from creditworthy borrowers, the Bulletin article said.
More challenges ahead for banks
May 28, 2010