Bank earnings soar $26 billion in second quarter

Bank earnings roared back in the second quarter of this year, posting a $26 billion gain over the same period last year.

The Federal Deposit Insurance Corporation (FDIC) reported Tuesday that banks posted $21.6 billion in earnings in the second quarter of 2010 compared with a net loss of $4.4 billion in the same period last year.

"This is the best quarterly profit for the banking sector in almost three years," said FDIC Chairman Sheila Bair in a statement. "Nearly two out of every three banks are reporting better year-over-year earnings. As long as economic conditions remain supportive, most institutions should maintain profitability and increase their capacity to lend."

Earnings are at their highest since the third quarter of 2007, although they remain below historical standards.

Still, the number of banks on the "problem list" grew from 775 to 829. 

The boost in earnings for the banking industry comes amid strong signs that the broader economy is weakening. Unemployment remains at near double-digit levels. The Commerce Department said last week that the economy grew at a 1.6 percent annual rate in the second quarter, which was slower than the 2.4 percent rate that was initially estimated.

The housing market remains weak, with steep declines in the sale of existing and new homes. Housing and Urban Development Secretary Shaun Donovan said Sunday on CNN that the administration is "concerned" about the industry and is looking at ways to boost the housing market.