FDIC: Banks Recovering, Need to Lend More

The banking industry continues to recover from the 2007-2009 financial crisis but lending will need to pick up if the recovery is to continue, Federal Deposit Insurance Corp Chairman Sheila Bair said on Wednesday.

Industry profits were up considerably from a year ago standing at $21.7 billion in the fourth quarter of 2010, which compares to a net loss of $1.8 billion a year ago, according to the quarterly banking report released by the agency.

Most of the increase, however, was due to banks putting aside less to guard against loan losses.Bair noted that in order for banks to fully move beyond the financial crisis they will need to start lending more.

"Cleaning up balance sheets is only a first step," Bair said in prepared remarks. "Now, we are looking to the industry to take the next step, and begin to build their loan portfolios."

Bair noted that the outlook for the industry overall is improving even for smaller banks who have been burdened by soured commercial real estate loans.

But there are still signs of trouble for smaller institutions.

The number of banks on the agency's problem list rose to 884 in the fourth quarter, an increase of 24 from the previous quarter.

The FDIC does not disclose the names of the institutions, which regulators have flagged for low capital levels, poorly performing assets or other troubles.