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F o r m P. R. 511 TO FROM REMARKS: July 21, 1943 Attached papers used in connection with Open Market Executive Committee and Treasury meetings during past few days. CHAIRMAN'S OFFICE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence To Chairman Eccles From Mr a Thurston Subject! Bank Earnings Attached is a memorandum and additional tables furnished by Mr, Horbett which may answer your question more satisfactorily than the previous memorandum and tables I transmitted to you, as the attached statistics cover all insured banks rather than just the member banks* However, the same general pattern, of course, prevails; that is, the net current earnings for all insured commercial banks, except the largest groups, namely, those with deposits of $50 millions or more, showed a decline in 19U2 as conpared with 19kl* If I read the tables right the same holds true for average net profits• Attachment BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence To Mr# Thurston From Mr» Horbett Date Jo1 ? Subject! Bank Earnings 19Ul and 19ij2 Following our conversation last Saturday, I telephoned Mr. Biompson of the Federal Deposit Insurance Corporation, and he furnished me certain statistics on net earnings and net profits of all insured banks in I9I4I and I9I42, on the basis of -which we have prepared the attached tables* One table shows average net current earnings per $100 of total capital accounts, and the other table shows average net profits per |100 of total capital accounts. Both tables give separate figures for each class of insured commercial banks—national, State member, and nonmesnber, and all of the ratios are presented by size of bank. You will observe that for all national banks and for all State member banks, taken as a whole, the average rate of net current earnings was somewhat higher in 19i|2 than in 19Ul« For insured nonmember commercial banks, taken as a -whole, the average rate of net current earnings was lower in 19i|2 than in I9kl* The distribution by size of banks shows that in every size group and for every class of bank, except banks with deposits of more than $50,000,000, the average rate of net current earnings was lower in 19^2 than in I9I4I. The second table, which gives average net profits (after losses and charge-offs), shows a reduction in the rate of net profits in all size groups in the case of national banks and in all but the largest size group in the case of State member banks and insured nonmember commercial banks. Both tables show that the smaller banks had relatively larger declines in earnings and profits than the medium size and larger banks.* I do not mean to imply, however, that the rates of earnings in 19ii2 of small banks were too low—merely that their rates of earnings declined considerably in I9k2. We have not prepared corresponding dollar figures of net earnings and net profits. They are available, but the dollar figures for 19i|2 are not comparable with those for 191*1* because of the big shift in the number of banks from one group to another, resulting from the growth in deposits. Tests that we have made indicate that the average rates of net earnings and net profits by size of bank are not seriously affected by this shifting of banks. * Banks in the largest size group (more than $50,000,000) reported higher rates of earnings and profits in I9I42 than in l To: Mr* Thurston - 2 - If desired, we can readily furnish dollar figures of the principal items of earnings and expenses for 19Ul &nd 191+2 by class of insured commercial banks—central reserve city banks, reserve city banks, country banks, and insured nonmeraber commercial banks. These figures will not be arranged by size of bank for the reason already mentioned. Attachments. AVERAGE NET CURRENT EASTINGS PER $100 OF TOTAL CAPITAL ACCOUNTS OF ALL INSURED CO2MERCIAL BANKS, BY CLASS iiND SIZE OF BANKS, I9J1I AND 19^2 l/ (Averages c a l c u l a t e d from aggregate dollar, amounts reported by banks i n each group. Source: Federal Deposit Insurance Corporation*) Banks with total deposits of-- All insured commercial banks National banks 2 / State member banks I9u2 19m $250,000 or less $250,000 to $500,000 $500,000 to $1,000,000 $1,000,000 to $2,000,000 $2,000,000 to $5,000,000 $5,000,000 to $50,000,000 More than $50,000,000 All size groups Insured nonmemiber commercial banks $7-72 8.77 8.52 $5-58 6.50 6.88 $5.68 6.61 7.23 $3.98 li.67 5.80 $6. lli &} 1 ^O*7 tp? (^ t 7.56 8.55 5.33 6.U3 $8.09 9-78 9-63 $5.7U 7.86 7.25 6.99 6.2? 6.82 6.78 6.65 7*02 6.57 6.73 6.20 6.37 6.59 7.73 7.61 7.0U 6.62 6.92 6.1i7 9.18 8.55 7.75 7.70 7.52 7.15 7.12 6.93 7.71 5.1*2 6.52 8«27 9.30 6.80 6.9k 6.86 7il6 5.89 6.38 8.72 7.1*8 7.07 7*68 1/ Net current operating earnings (after income taxes and after recurring depreciation on real estate) per $100 of ~~ total capital accounts as of December 31 of banks operating the full year. Trust companies not engaged in deposit banking excluded. Total capital accounts of State member banks, by size of bank, estimated for I9UL 2/ Including nonmember national banks outside the continental United States. ]£/ Excluding three member mutual savings banks• BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM DIVISION OF BANK OPERATIONS JULY 13, 19U3 AVERAGE NET PROFITS PER $100 OF TOTAL CAPITAL ACCOUNTS OF ALL INSURED COMMERCIAL BANKS, BY CLASS AND SIZE OF BANKS, 19Ul AND (Averages calculated from aggregate dollar amounts reported by banks in each group. Source? Federal Deposit Insurance Corporation.) Banks with total deposits of— All insured commercial banks 191+1 f 19u2 National banks 2f State member banks 2i Insured nonmember commercial banks 1941 I 19U2 191+1 191+2 19W $2...99 1+.19 1+.91 $5.80 7-87 9.16 $5.65 6.22 6.1+6 $7.35 9.H+ 8.57 $6.03 6.33 6.05 5.28 7-7U 5.78 5.H+ 6.59 5.56 1+.76 | 191+2 $6.96 8.32 7-97 $5.78 6.80 6.1+1 6!l+l+ $1,000,000 to $2,000,000 $2,000,000 to $5,000,000 $5,000,000 to $50,000,000 7. ol+ 6.16 6.37 5.69 5.37 5.1*0 6.61 6.25 6.80 1+.86 5.09 5.66 6.93 6.1+7 6.22 More than $50,000,000 6.62 6*7? 7.96 7.37 5.02 6.05 6.01+ 6.22 6.66 6.26 7.37 6.52 5-1+0 5-93 6.89 6.06 $250,000 or less $250,000 to $500,000 $500,000 to $1,000,000 All size groups 6.98 7.53 7.39 l/ Net current operating earnings, plus profits and recoveries and minus losses and charge-offs, per $100 of total capi""" tal accounts as of December 3* °** banks operating the full year. Trust companies not engaged in deposit banking excluded. Total capital accounts of State member banks, by size of bank, estimated for Y)Ul* 2/ Including nonmember national banks outside the continental United States. 5/ Excluding three member mutual savings banks. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM DIVISION OF BANK OPERATIONS JULY 13f
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