US lending drops but profit up

US banking showed signs of improvement in the last quarter, as firms posted their biggest profit in almost three years despite a fall in lending and a jump in the number of at-risk institutions. The $21.6bn gain in the three months to 30 June was aided by lenders covering fewer expected loan losses, said the Federal Deposit Insurance Corp.

However, the number of banks at risk of failure rose to 11 per cent of all covered firms, the most since 1992. Overall lending fell 1.4 per cent in the quarter.