US bank earnings up 37% in Q4

Updated 27 February 2013
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US bank earnings up 37% in Q4

WASHINGTON: Profits at US banks jumped almost 37 percent from October through December, reaching the highest level in six years as banks continued to step up lending.
The figures are fresh evidence of the industry's sustained recovery more than four years after the financial crisis.
Banks earned $ 34.7 billion in the fourth quarter, the highest since the same period in 2006, the Federal Deposit Insurance Corp. reported yesterday. Sixty percent of banks reported improved earnings from the fourth quarter of 2011, the agency said. The FDIC, created during the Great Depression to ensure bank deposits, monitors and examines the financial condition of US banks.
For all of 2012, bank earnings rose 19 percent to $ 141.3 billion, the second-highest annual level ever.
The number of banks on the agency's "problem" list fell to 651 from 694. Banks had lower losses on loans in the fourth quarter and set aside almost 25 percent less to cover potential losses than in the final quarter of 2011.
"The improving trend that began more than three years ago gained further ground in the fourth quarter," FDIC Chairman Martin Gruenberg said in a statement. Still, "troubled loans, problem banks and bank failures remain at elevated levels, while growth in lending and revenue remains sluggish."
Banks with assets exceeding $ 10 billion drove the bulk of the earnings growth in the October-December period. While they make up just 1.5 percent of US banks, they accounted for about 82 percent of the industry earnings.
Those banks include Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. Most of them have recovered with help from federal bailout money and record-low borrowing rates.
For the sixth time in seven quarters, banks' lending increased. It rose by 1.7 percent in the fourth quarter, led by growth in commercial and industrial loans, and credit cards. That shows banks are becoming less cautious, which could help the economy. More lending leads to more consumer spending, which drives roughly 70 percent of economic activity.
Home equity loans fell by 2.2 percent, however.
So far this year, three banks have failed. That follows 51 closures last year, 92 in 2011 and 157 in 2010. The 2010 closures were the most in one year since the height of the savings and loan crisis in 1992.
In the fourth quarter, the decline in bank failures allowed the insurance fund to continue to strengthen. The fund, which turned from deficit to positive in the second quarter of 2011, had a $ 32.9 billion balance as of Dec. 31, according to the FDIC. That compares with $ 25.2 billion at the end of September.
The FDIC is backed by the government, and its deposits are guaranteed up to $ 250,000 per account. Apart from its deposit insurance fund, the agency also has tens of billions in loss reserves.


Financial crime leads to billions of lost business in Middle East, survey finds

Updated 24 May 2018
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Financial crime leads to billions of lost business in Middle East, survey finds

  • Some 45 percent of MENA respondents in Thomson Reuters victims of fraud, corruption and bribery
  • 77 percent of MENA respondents deliberately avoided customers, suppliers, countries or industries viewed as most exposed to financial crime.

LONDON: Middle Eastern companies are losing billions of dollars in business opportunities because of fears about financial crime, according to a Thomson Reuters survey published on Thursday.

Concern about the possibility of severe financial and reputational damage due to regulatory breaches leads foreign investors and firms to shun companies and entire regions where they see “heightened risk.”

In the Middle East and North Africa (MENA), 77 percent of survey respondents said that they deliberately avoided customers, suppliers, countries or industries which they viewed as most exposed to financial crime.

“The impact in terms of lost opportunities at both organizational and national level is difficult to quantify, but likely to impact productivity and economic development,” Thomson Reuters said.

The report was conducted online by an independent third party in March 2018. More than 2,000 senior managers at large global organizations completed the survey, from 19 countries.

In a hard-hitting conclusion, the report said: “For the first time our research has put a price on financial crime: three and a half percent of corporate turnover for the 2,373 large companies in our survey alone. That adds up to a staggering $1.45 trillion.”

Financial crime was said to blight individual lives and undermine the ability of governments to provide key services such as education and health. The IMF has shown that it reduces economic growth and social cohesion.

Che Sidanius, global head of financial crime regulation at Thomson Reuters, said that financial crime caused “incalculable” harm around the world. The proceeds of activities spanning bribery, corruption, fraud, and narcotics trafficking have been implicated in the financing of terrorism, human rights abuses such as slavery and child labor, and environmental crime.

“This has serious economic and social costs in terms of the lost revenues to national exchequers that could be invested in social development, and in terms of the impact on individual lives,” Sidanius said.

Other key findings were that 45 percent of MENA respondents had been a victim of financial crime as opposed to 47 percent globally; 96 percent believed that bribery and corruption was an important issue to tackle; 57 percent indicated that the consequences of bribery and corruption meant less government revenue; only 59 percent said that they fully conducted due diligence; and only 60 percent fully conducted due diligence, the report said.