After eight years of increasing earnings, aggregate annual profits for the banking industry declined in 2000. The streak's end can be attributed to securities losses and to clean-up actions taken by large banks to tidy their loan portfolios.
Large dividends paid out in the fourth quarter offset gains in capital from retained earnings.
The coverage ratio declined from 1.61 at the end of the third quarter to 1.49 in the fourth, its lowest level since 1994. The ratio of noncurrent commercial and industrial loans to reserves rose to 1.67 percent in the fourth quarter from 1.52 percent. Commercial and industrial loans accounted for 39.2 percent of the charge-offs. Increased provisions by a few large banks had considerable effects on consolidated industry earnings. Fixed-rate securities experienced losses because of higher interest rates throughout most of 2000.