FDIC Quarterly Banking Profile Takes a Back Seat to Bernanke
According to the report, FDIC-insured financial institutions earned $34.7 billion in net income in the fourth quarter down from $37.6 billion in the third quarter. Earnings continue to be buoyed by the reduction of loan loss provisions and rising noninterest income, not by a significant increase in interest income from new loan issuance as tight credit standards continue.
Year over year net income was up 36.9%, but net interest income, the life-blood of the banking system, registered a $2.7 billion (2.5%) decline. This is a sign that the "Great Credit Crunch" continues.
I will drill down into the FDIC data in subsequent posts focusing on the impact to the housing market, money center and regional and community banks. I will say that community banks remain reluctant to lend to developers and home builders as legacy C&D loans remain elevated at $203.9 billion at the end of 2012.
On Tuesday, the stock market regained some of Monday's lost ground, as Fed Chief Ben Bernanke re-iterated his pledge to continue QE3 and QE4 until the unemployment rate declined to 6.5%. Bernanke concluded that Fed policy was helping the housing market recovery and Tuesday's housing data supported his opinion.
Tuesday began with the January readings for the S&P Case-Shiller home price indices. The 20-City Composite, the one I focus on, showed that home prices rose by 6.8% in 2012. The index shows that home prices are still down 30% from their June/July 2006 bubble peak, despite an 8% to 9% gain since the March 2012 low. If you bought your home at the beginning of the new millennium your home has appreciated by 46.0%.
At 10 a.m. as Bernanke began his Congressional testimony and subsequent Q&A we learned that new home sales surged 15.6% in January to an annual rate of 437,000, but this is old news given the slippage in home builder confidence in February.