U.S. banks earn record profit

According to Weiss Ratings Inc., the nation's 9,517 commercial banks, savings banks and savings and loans institutions reported a record quarterly profit of $25.4 billion for the first quarter of this year. Industry profits were $2.6 billion, or 11.3 percent, higher than the previous record quarterly profit of $22.8 billion, which was set in the first quarter of 2001.

Weiss, an independent provider of ratings and analyses of financial services companies, mutual funds and stocks, determined that the bulk of the increase was a direct result of net interest margins. Falling interest rates allowed banks to lower the rates they pay on customer deposits, thereby reducing their interest expenses for the quarter by 45.2 percent, compared to the previous year. That reduction more than offset the 17.9 percent decline in interest income from loans and investments for the first quarter. The net result was an $8.7 billion increase in net interest income, which gave the industry a collective net-interest margin of 3.58 percent the highest level since year-end 1999.