Litigation cost lowers US bank-industry Q3 earnings

The third quarter profits of U. S. bank-industry fell due to huge litigation costs, the first time since the second quarter of 2009, said the Federal Deposit Insurance Corporation (FDIC) on Tuesday. The profits in the third quarter are 36 billion U.S. dollars, 3. 9 percent lower than the 37.5 billion dollars in the third quarter of 2012, said FDIC. "This is the first year-over-year decline in over four years, and it is mainly attributable to a 4 billion increase in litigation expenses at one institution. Had it not been for that the upward trend in earnings would have continued." said FDIC Chairman Martin Gruenberg. Reduction in mortgage lending activity also contributed to the earning declines, added Gruenberg. Although earnings declined, the pace for the recovery of U.S. bank-industry still went on. Half of the institutions reported growth in earnings in the third quarter compared with the same period last year, while the proportion of banks that were unprofitable fell to 8.6 percent, from 10.7 percent a year earlier. "However most of the positive trends we have been seeing in industry performance continued in the third quarter, "said Gruenberg,"Fewer institutions reported quarterly losses, lending grew at a modest pace, credit quality continued to improve, more banks came off the problem list and fewer banks failed."