Both figures represent the industry’s best six-month performance ever and reflect impressive growth on top of what were already impressive results. Net interest income was the primary driver of increased revenue, despite a notable decline in commercial loan volume. Loan loss provisions remained relatively high by the standards of most of the past decade but dipped notably from the second half of 2001.
Net charge-offs, which were concentrated among commercial loans of large banks and credit card specialty lenders, also dropped. While this improvement since year-end may signal that problem assets have peaked, some large institutions have not yet fully recognized the results of this year’s supervisory assessment of shared national credits. Consequently, we may see further deterioration in asset quality during the periods ahead.