Profits and strongBalancestrong Sheet Developments at U.S. Commercial.pdfVIP

A1 May 2010 Profits and Balance Sheet Developments at U.S. Commercial Banks in 2009 Seung Jung Lee and Jonathan D. Rose, of the Board’s banks faced in late 2008 abated over the first half of Division of Monetary Affairs, prepared this article. 2009, largely because of unprecedented interventions Thomas C. Allard and Mary E. Chosak assisted in by the Treasury, the Federal Reserve, and the FDIC. developing the database underlying much of the Asset quality worsened for all major loan classes analysis. Michael Levere and Robert Kurtzman pro- over 2009, but real estate loans backed by residential vided research assistance. and by commercial properties remained at the center of banks’ credit quality problems. Conditions in the The U.S. commercial banking sector remained under real estate sector generally stayed weak, especially in significant pressure in 2009. Bank profitability was commercial markets. House prices continued declin- damped by the effects of the weak economy on asset ing sharply in the first half of the year but were more quality and lending activity, with loan delinquency stable in the second half. The stabilization of prices and charge-off rates rising to historical highs in many partly reflects stronger demand for housing that was cases and banks’ balance sheets contracting. Reflect- likely spurred