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The Honolulu Advertiser
Posted on: Sunday, December 1, 2002

Bank credit card loan writeoffs up 35.6 percent

Associated Press

WASHINGTON — Credit-card loans written off by the nation's commercial banks jumped 35.6 percent to $3.9 billion in the three months ending in September as credit quality problems continued to grow.

The surge in writeoffs, compared with the third quarter of 2001, came as banks earned $23.4 billion, only $11 million short of the record set in the second quarter of this year, the Federal Deposit Insurance Corp. reported last week.

The third-quarter profits were up 34.8 percent from the July-September period last year. Still, they were held back by sharply lower income from banks' international operations and by higher expenses for loan losses, the FDIC said.

"The ride became a little bumpier — particularly for a few large institutions — in the third quarter, but the industry as a whole enjoyed near-record earnings," said FDIC vice chairman John Reich. "It remains well positioned to continue to be an engine of growth for the economy."

Also reflecting consumers' problems paying back credit-card loans, the federal courts reported last week that record numbers of individuals found themselves in heavy debt and filed for bankruptcy in the 12 months that ended Sept. 30. Personal bankruptcy filings rose 1.5 percent to a total of 1,508,578.

The FDIC said the number of commercial banks on its "problem list" rose to 126 from 115 in the second quarter, with a total $38 billion in assets.

In addition, one commercial bank failed during the third quarter, the FDIC said. The failure in September of AmTrade International Bank of Atlanta brought a $6 million loss to the federal deposit insurance fund. So far this year, 10 federally insured institutions — nine banks and one savings and loan — have failed.

Return on assets, a basic yardstick of bank profitability, was an average 1.37 percent in the third quarter, down from the record 1.41 percent in the second quarter. But most banks, 55.6 percent, saw their ROAs improve.

The Office of Thrift Supervision reported earlier last month that earnings increased 14 percent at the nation's savings and loans in the third quarter to $2.97 billion.