FDIC chairman bullish about banking’s recovery

Martin Gruenberg, chairman of the Federal Deposit Insurance Corp., said Wednesday that he is bullish about the future of the U.S. banking business and notes the industry, severely damaged by the recession, has posted three consecutive years of improvement.

Industry net income has increased on a year-over-year basis for 14 consecutive quarters, while annual income for the industry in 2012 was just over $141 million — the highest level of annual income since 2006 and the second highest ever.

Gruenberg said that in the fourth quarter, loans grew by nearly $120 million. The largest single category for growth was in commercial and industrial loans, but the industry also saw increases in consumer , farm and real estate loans.

“These positive trends have been broadly shared across the industry,” Gruenberg said in a speech at the Independent Community Bankers of America National Convention at Wynn Las Vegas. “So I think it is fair to say that we continue to see a gradual but steady recovery in the U.S. banking industry that has now been sustained over three years.”

Gruenberg said FDIC data have been moving in “a positive direction over this period.”

He said there were 51 bank failures last year, down from 92 in 2011. The problem-bank list, which peaked in March 2011 at 888 institutions, fell to 651 last year.

The FDIC’s Deposit Insurance Fund, which was more than $20 billion in the red three yeas ago, is back in the black at almost $33 billion. The FDIC is required to build up the fund’s reserve ratio to 1.35 percent of insured deposits by 2020.

The fund is just over 0.4 percent, according to the FDIC. Gruenberg said he expects the fund to meet its reserve ratio requirement, but the “bad news is that premiums will probably not be coming down anytime soon.”

Gruenberg didn’t anticipate the need for any assessment increases.

“Our sense is that if we can maintain even that modest level of growth, the industry will continue to work its way out of the aftermath of this crisis and the ensuing recession,” he said. “We still have elevated levels of problem loans and problem banks … and more work to do in repairing balance sheets, but we have now sustained a positive direction for an extended period of time.”

Contact reporter Chris Sieroty at csieroty@reviewjournal. com or 702-477-3893. Follow @sierotyfeatures on Twitter.