20 May 2011

FDIC Has Just Corrected the Past

For analysing US bank statistics I first extracted the Commercial Bank Reports from FDIC database on 18 May 2011 (United States and Other Areas). At that point the data was available up to the end of 2009. Today (20 May) morning I noted that the year 2010 had been added to the dataset. It also turned out that statistics for 2005-2009 had been amended.

While updates for 2005-2008 were not that significant the consolidated Net Income for all US commercial banks had been changed by -214%. More precisely, on May 18 the total Net Income of USD 10.8bn was shown which by May 20 had been replaced by the aggregated loss of USD 12.3bn. For comparison, the change of USD 23bn forms almost 20% of the boom year (2006) profits – thus it is not just a minor adjustment.

A bit closer look revealed that the main contributors to the downward revision of the Net Income were Intangible Assets (a decline of USD 20.5bn) and Net Loans and Leases (a decline of USD 5.6bn). So much then about data quality, and precise methods and models for estimating fair values of assets and liabilities...

Considering that according to the FDIC statistics, US commercial banks still have Intangible Assets in the amount of USD 373.3bn (which forms ca. 3.1% of Total Assets) in their balance sheets as of at the end of 2010, I’d be rather careful when reading the banks’ financial statements or conducting industry analyses.

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