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Fewer Banks In the U.S. Considered To Be at Risk

The number of banks on the government’s list of institutions most at risk for failure fell in the second quarter, the first drop since before the financial crisis began.

Twenty-three lenders came off the list of so-called problem banks during the second quarter, bringing the total to 865, according to data released Tuesday by the Federal Deposit Insurance Corporation. Not all the troubled lenders will inevitably fail, but the F.D.I.C. considers them most at risk, making the quarterly update one of the clearest measures of the banking industry’s health.

It was the first decrease in the number of problem banks since the third quarter of 2006.

The report also contained other signs of improvement. There were 48 bank failures in the first half of 2011, far fewer than the 86 failures in the first six months of 2010. Last year’s total of 157 collapsed banks was the highest since the last severe recession, in the early 1990s.

And the F.D.I.C. insurance fund that protects the nation’s depositors showed a surplus for the first time in two years. It stood at $3.9 billion, compared with a negative $1 billion balance at the end of the first quarter.

Still, the magnitude of problem banks — roughly one of every nine lenders — remains relatively high. And the number could rise again if the economy suffered another downturn, a prospect that seems increasingly likely amid all the grim data that has surfaced in the weeks since the list was compiled at the end of the June.

Martin J. Gruenberg, the acting F.D.I.C. chairman, played down that risk in some of his first public remarks since being nominated to run the agency in June.

“Banks have continued to make gradual but steady progress from the financial turmoil and severe recession that unfolded from 2007 and 2009,” Mr. Gruenberg said in a statement.

Beyond the drop in problem lenders, there were other signs that the industry was getting back on its feet. The nation’s 7,513 banks and savings institutions reported a total profit of $28.8 billion in the second quarter, up nearly 38 percent from a year ago and the eighth consecutive quarter that earnings have increased. Bank losses continued to ease, while loan balances rose — albeit slightly — for the first time since the second quarter of 2008.

Much of the uptick in lending could be attributed to loans made to businesses and other financial institutions. Real estate lending continued to be very weak.

Total revenue fell for the second quarter in a row. Fee income declined as more stringent regulations curbed overdraft charges and other penalty fees, while interest income was lower because of an increase of money in low-yielding accounts at Federal Reserve banks.

The recent market turbulence from the debt crises in Europe and the United States continues to weigh on the industry. Deposits increased almost 3 percent during the second quarter, with the bulk of the cash going into the nation’s largest banks.

“Recent events have reminded us that the U.S. economy and U.S. banks still face serious challenges ahead,” Mr. Gruenberg said in the statement.

Article source: http://feeds.nytimes.com/click.phdo?i=28c3667a899e55ed3ee2dd3826f854cb

Off the Charts: Strong Manufacturing Revival Seems to Be Fading

Surveys of manufacturing companies around the world indicate that business is still improving for many of them, but that the pace of growth has slowed.

In the United States, the Institute for Supply Management reported that the overall reading for its survey in May fell to 53.5 from 60.4. Figures above 50 indicate that more companies say business is improving than say it is getting worse, so that is hardly a sign of a new recession.

Still, it played into a rising fear that the recovery is slowing again at a time when unemployment remains high.On Friday, the Bureau of Labor Statistics reported that the rate rose to 9.1 percent in May, up a tenth of a percentage point.

The drop of 6.9 points was the largest one-month decline since January 1984, a fact that received considerable attention. Less noted was the fact that the earlier decline came off even higher figures and did not presage a return to the recession that ended in late 1982.

The figures show the direction of change, not the magnitude or the existing level. Extremely strong numbers can persist for long periods only if conditions are continually improving.

The accompanying charts show three components of the survey, which is conducted in many countries around the world, and indicate that the slowing of growth is a more general phenomenon. For ease of understanding, the figures are converted to place a 50 reading — one that indicates an equal number of positive and negative responses — at zero.

The slide appears to be worse in Britain, where a strong revival late last year and early this year seems to have vanished. There, readings came in at negative levels for both output and new orders, the first time that had happened since May 2009, when the credit crisis was only beginning to ease. But more companies there continue to say they are hiring rather than reducing payrolls.

In the United States, the figure for new orders remains barely positive, and the output figure also declined, although it remains positive. The figure for employment also fell, but it remained at a level that historically has accompanied good jobs figures. The employment index has been over 55, or 5 in the chart, for 16 consecutive months, the longest such stretch since 1965.

Labor Department figures indicate that the number of manufacturing jobs hit bottom in December 2009 and that employment has been rising more rapidly in that sector than in the economy as a whole, although it fell by 5,000 jobs in May.

On average, the euro zone appears to be stronger than any of the other countries shown, but this is a case where averages can be misleading. The German boom cooled only a little, and France remains strong. But already weak figures in Greece are getting worse, and Spanish manufacturers see some deterioration.

In Japan, the figures show some revival from the blow caused by the earthquake and tsunami in March. The output index went above break-even levels after falling sharply, but as a group, Japanese manufacturers still say they are reducing employment.

Article source: http://feeds.nytimes.com/click.phdo?i=d732a3b4220ed57f90b4dd5ecf4af24b

Fewer Banks In the U.S. Considered To Be at Risk

Off the Charts: Strong Manufacturing Revival Seems to Be Fading

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