Net income from U.S. banks totalled $1.7 billion in the third quarter, according to the Federal Deposit Insurance Corporation on Tuesday, who added that the figure represents a 94% decline in banking income compared to twelve months ago.

The report cited a $7.6 billion loss on sales of securities and other assets and high provisions for losses on loans as the main contributors to the decline.

The FDIC also noted that nine insured institutions failed in Q3, the most since Q3 1993.

In the press conference announcing the statistics, FDIC Chairperson Sheila Bair said that losses from troubled loans were steadily rising due to the pressure on consumer loans, and that the challenging credit environment will persist for some time.

She added that Citigroup was helped in order to prevent further problems in the financial markets and that she expects more banks in the U.S. to fail.

In the meantime, most banks in the U.S. remain well capitalized, profitable and sound, she said.

The announcement comes on the heels of announcements from the Federal Reserve and the U.S. Treasury, which unveiled a lending facility geared at supporting the consumer asset-backed commercial paper market.

Bair added that she supports this program.

By Erik Kevin Franco and edited by Nancy Girgis
©CEP News Ltd. 2008