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Fast Facts: FINANCIAL SERVICES RECOVERY HINGES ON ECONOMY

"The banking industry continued to make gradual but steady progress toward recovery in the second quarter, said FDIC Acting Chairman Martin J. Gruenberg on August 28, 2012. FACT: Highlights from the Federal Deposit Insurance Corporations Quarterly Report for Q2 2012 include: Loan balances rose for the fourth time in the last five quarters. Total loans and leases grew by $102 billion (1.4 percent), with loans to commercial and industrial (C&I) borrowers increasing by $48.9 billion (3.6 percent), residential mortgage loans rising by $16.6 billion (0.9 percent), and credit card balances growing by $14.7 billion (2.3 percent). Noncurrent loan balances declined for a ninth consecutive quarter, falling by $12.9 billion (4.2 percent). Noncurrent levels fell in all major loan categories. Financial institutions added 6,000 new full-time employees in the second quarter of 2012. Insured institutions posted a 12th consecutive year-over-year increase in quarterly net income. Banks earned $34.5 billion in the quarter, a $5.9 billion (20.7 percent) increase compared with second quarter 2011. Net charge-offs totaled $20.5 billion in the second quarter, an $8.4 billion (29.1 percent) reduction from second quarter 2011. This is the eighth consecutive quarter that charge-offs have declined from year-earlier levels and represents the lowest quarterly charge-off total since first quarter 2008. The number of institutions on the FDICs Problem List fell for a fifth consecutive quarter, from 772 to 732. Total assets of problem institutions declined from $291 billion to $282 billion.

FACT: Most individual U.S. banks rating outlooks are stable, according to Moodys Banking System Outlook released on September 4, 2012. In the past two and a half years, the majority of US banks rating outlooks changed to stable from negative at their lower rating levels. A common driver for the change in the banks rating outlooks has been their improved ability to handle risks thanks to their larger capital and liquidity buffers. FACT: Despite individual bank improvements, Moodys investment outlook for bank stocks is negative, predominately due to a challenging domestic operating environment, characterized by low interest rates, high unemployment, weak economic growth and uncertainty over US fiscal policy. Compounding this challenge is the threat of contagion stemming from the sovereign and banking crisis in Europe. Together, these attributes undermine the strength of economic recovery in the US, and expose the economy to a heightened risk of shocks. September 2012

Financial Services HOTLINE: If you have questions about this topic or any other issue facing financial services, please reach out to Abby McCloskey, Director of Research at the Financial Services Roundtable, at 202-589-2531 or Scott Talbott, Senior Vice President of Government Affairs, at 202-289-4322. Learn more about the Financial Services Industry at www.OurFinancialFuture.com. OurFinancialFuture.com is continuously updated to bring you the most useful information about the industry in real-time.
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September 2012