Number: RL32542
Title: The Condition of the Banking Industry
Authors: Walter W. Eubanks, Government and Finance Division 
Abstract: After six years of continuous record-breaking profits, the effects of the deepening subprime mortgage foreclosures crisis have brought the record-breaking profit making streak to an abrupt end. On a year-over-year basis, net income of Federal Deposit Insurance Corporation (FDIC)-insured commercial and savings institutions declined by $40.2 billion (27.6%) between 2006 and year end 2007. Some fourth quarter data were worse than they were during the 2001 recession. For example, the fourth quarter net income of $5.8 billion was the lowest since 1991. In the 2001 recession, the return on assets (ROA) for the industry was 1.16%. By December 31, 2007, the ROA had fallen to 0.86%, 30 basis points below what it was during the 2001 recession. With expected significantly poorer earnings for 2008 and 2009 due mainly to subprime mortgage foreclosures, profitability for 2008 is expected to fall short of 2007.
Pages: 12
Date: March 14, 2008