Rising interest rates threaten to end a recent letup in losses by savings institutions, some economists say.
According to the Federal Home Loan Bank Board, losses for the nation's 3,024 savings and loan associations had dropped to $1.6 billion in the July-September period, down from $3.9 billion in both the first and second quarters.Most of the improvement came in non-operating losses - meaning institutions wrote off fewer bad loans. They dropped from $3.6 billion in the second quarter to $1.4 billion in the third.
James Barth, chief economist of the bank board, declined to predict non-operating losses in the current October-December quarter, but he said operating profits, which rose in the third quarter, will be hurt because of rising interest rates this quarter.
Rising interest rates narrow the spread between what an institution has to pay for its money and what it can earn on loans and other investments.
"Interest rates do not bode well for the future," said Martin Regalia, chief economist of the National Council of Savings Institutions, a trade group.
The bank board released the loss figures for the third quarter two weeks ago. On Tuesday, in a more detailed report, it said the number of insolvent savings institutions continued to fall.