Bank Set Asides Rise as Charge Offs Increase

Financial institutions set aside $11.4 billion in provisions for loan losses in the second quarter this year, a 75 percent rise from the provisions made in the same period a year ago, according to the Quarterly Banking Profile from the Federal Deposit Insurance Corp. this week.

For institutions with assets greater than $1 billion, the loss set-asides accounted for 7.7 percent of net operating revenues in the second quarter this year, up from 4.5 percent a year ago.

Net charge offs totaled $9.2 billion, a rise of more that 51 percent from the second quarter of 2006. Credit card charge offs rose $393 million or 12 percent.

Loans and leases that were noncurrent, or 90 days or more past due, grew by $6.4 billion, nearly 11 percent, in the second quarter.

The $11.4 billion in set-asides represented an increase of $2.6 billion, and exceeds the $9.2 billion in net charge offs. Still, the growth in noncurrent loans exceeded that of the loan-loss reserves, the FDIC reported.

The agency found that industry earnings were strong in the second quarter, with insured commercial banks and savings institutions reporting $36.7 billion in net income. That was down more than 3 percent from the second quarter of 2006 but a rise of a more than 2 percent from the first quarter of this year.

The FDIC’s quarterly report tracks the financial results of the more than 8,600 insured institutions in the U.S.