FDIC reports rise in problem banks

The number of institutions the FDIC insures - firms considered to have serious problems endangering their continued existence - increased from 117 to 171 in the third quarter of 2008, a rise of 46%. Meanwhile, the total value of assets held by "problem" institutions rose to $115.6 billion from $78.3 billion in the previous quarter.

The report demonstrated how the financial crisis has reverberated throughout the US banking system, as nine FDIC-insured institutions failed in the third quarter, the highest number since 1993. Washington Mutual, which was taken over by JP Morgan Chase at the end of September, was the most prominent casualty, with assets of $307 billion.

In all, profits of banks and thrifts insured by the FDIC slumped to $1.7 billion compared with $28.7 billion in the same period of 2007, a fall of 94%.

The fall in industry profits was primarily blamed on higher provisions for loan losses in the quarter. The report pointed to substantial losses incurred by a handful of institutions, but also noted that 58% of insured institutions reported lower net income in the third quarter, and 24% reported a net loss.

"We've had profound problems in our financial markets that are taking a rising toll on the real economy," said FDIC chairman Sheila Blair. "Today's report reflects these challenges."

See also: Meagre $5bn profit for US commercial banks, says FDIC
JP Morgan and Wells Fargo profits tumble in Q3

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