Profits of United States banks jumped almost 37 per cent, from October through December, reaching the highest level in six years as banks continued to step up lending.
The figures are fresh evidence of the banking industry's sustained recovery more than four years after the financial crisis.
The Federal Deposit Insurance Corp reported Tuesday that banks earned US$34.7 billion in the fourth quarter, the highest since the same period in 2006.
Sixty per cent of banks reported improved earnings from the fourth quarter of 2011, the agency said. The FDIC, created during the Great Depression to ensure bank deposits, monitors and examines the financial condition of US banks.
For all of 2012, bank earnings rose 19 per cent to US$141.3 billion, the second-highest annual level ever.
The number of banks on the agency's 'problem' list fell to 651 from 694. Banks had lower losses on loans in the fourth quarter and set aside almost 25 per cent less to cover potential losses than in the final quarter of 2011.
"The improving trend that began more than three years ago gained further ground in the fourth quarter," FDIC Chairman Martin Gruenberg said in a statement. Still, "troubled loans, problem banks and bank failures remain at elevated levels, while growth in lending and revenue remains sluggish."
Banks with assets exceeding US$10 billion drove the bulk of the earnings growth in the October-December period. While they make up just 1.5 per cent of US banks, they accounted for about 82 per cent of the industry earnings.
Those banks include Bank of America Corp, Citigroup Inc, JPMorgan Chase & Company and Wells Fargo & Company.
Most of them have recovered with help from federal bailout money and record-low borrowing rates.
For the sixth time in seven quarters, banks' lending increased. It rose by 1.7 per cent in the fourth quarter, led by growth in commercial and industrial loans, and credit cards. That shows banks are becoming less cautious, which could help the economy.
More lending leads to more consumer spending, which drives roughly 70 per cent of economic activity.
Home equity loans fell by 2.2 per cent, however.
So far this year, three banks have failed. That follows 51 closures last year, 92 in 2011 and 157 in 2010. The 2010 closures were the most in one year since the height of the savings and loan crisis in 1992.
In the fourth quarter, the decline in bank failures allowed the insurance fund to continue to strengthen.
The fund, which turned from deficit to positive in the second quarter of 2011, had a US$32.9 billion balance as of December 31, according to the FDIC. That compares with US$25.2 billion at the end of September.
The FDIC is backed by the government, and its deposits are guaranteed up to US$250,000 per account. Apart from its deposit insurance fund, the agency also has tens of billions in loss reserves.