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The Boston Globe

Business

Fee income lifts US bank profits

Richard Drew/Associated Press/File 2013

WASHINGTON — US banks earned more from January through March than during any quarter on record, buoyed by greater income from fees and fewer losses from bad loans.

The banking industry earned $40.3 billion in the first quarter, the Federal Deposit Insurance Corp. said Wednesday. That’s the highest ever for a single quarter and up 15.8 percent from the first quarter of 2012, when the industry’s profits were $34.8 billion.

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Record profits show banks have come a long way from the 2008 financial crisis. But the report offered a reminder that the industry is still struggling to help the broader economy recover from the Great Recession.

Only about half of US banks reported improved earnings from a year earlier, the lowest proportion since 2009. That shows the industry’s growth is being driven by a narrower group of the nation’s largest banks.

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.

Bank lending declined from the October-December quarter, although that followed several quarters of increases.

And bank profits from interest charged fell 2.2 percent to $104 billion. The industry’s average interest income as a percentage of total loans on its books fell from 3.35 percent to 3.27 percent. That’s the lowest portion of total loans in nearly seven years.

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That has forced banks to see more revenue from fees, despite complaints from customers and consumer advocates.

FDIC chairman Martin Gruenberg said the banking industry ‘‘is in much stronger shape today than it was three years ago.’’ But he added that ‘‘it’s a fairly tricky environment for the industry’’ because of narrowing profit margins from charging interest and relatively weak demand for loans.

Income earned from interest on loans is falling in part because interest rates have been near record lows. The Federal Reserve’s aggressive stimulus programs since the crisis have exerted downward pressure on short- and long-term interest rates, making mortgages and other loans cheaper. The Fed’s low interest-rate policies are intended to boost borrowing and spending to accelerate overall economic growth.

Still, many banks have adopted stricter lending standards since the financial crisis. So while loans are a bargain, they are only available to those who can qualify.

Another sign of the industry’s health is that fewer banks are at risk of failure. The number of banks on the FDIC’s ‘‘problem’’ list fell to 612 from 651 as of Dec. 31.

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