U.S. bank earnings rise to $38.7 billion in third quarter 2014 -FDIC

WASHINGTON (Reuters) - U.S. bank earnings rose to $38.7 billion (25 billion pounds) in the third quarter of 2014 as institutions boosted trading and other revenue, according to data released on Tuesday by the Federal Deposit Insurance Corp (FDIC). Bank earnings during the quarter that ended on Sept. 30 rose $2.6 billion, or 7.3 percent, from $36.1 billion in the same period a year earlier, the FDIC said. For the first time in five years, banks set aside more money in case of losses on loans. That reversed a recent trend in which institutions slashed those funds to make up for weak mortgage and trading income. Loan-loss provisions totalled $7.2 billion in the third quarter, up $1.4 billion, or 23.9 percent, from a year earlier, the FDIC said. "Most importantly, third quarter income growth was based on revenue growth instead of lower loan-loss provisions," FDIC Chairman Martin Gruenberg said in a statement. "This can be a more sustainable foundation for continued earnings growth going forward." Overall, bank revenue rose $7.8 billion, or 4.8 percent, to$171.3 billion during the quarter. That was the biggest year-over-year increase in operating revenue since the end of 2009, the FDIC said. Banks saw gains on loan sales, and trading income was up 25.3 percent. Net interest income rose by $2.4 billion, or 2.3 percent, from a year earlier, the FDIC said. Salary and benefit expenses were higher during the quarter, even though banks have reduced total headcount. Litigation expenses at large banks dropped from a year ago, the FDIC said. Gruenberg said regulators remain concerned about interest rate risk as banks buy assets with longer maturities. He said banks also are extending more high-risk loans to commercial borrowers that already have debt. (Reporting by Emily Stephenson; Editing by Susan Heavey)