Commercial banks and savings institutions reported growth in earnings and revenue in the fourth quarter of 2016 compared with a year earlier, and the number of problem banks continued to fall, according to the Federal Deposit Insurance Corporation.
FDIC insured institutions reported aggregate net income of $43.7 billion in the fourth quarter of 2016, up $3.1 billion or 7.7% from the same quarter a year earlier, according to the FDIC’s Quarterly Banking Profile. The earnings increase was mainly attributable to 7.6% increase in net interest income, according to an FDIC news release.
Of 5,913 insured institutions reporting fourth quarter financial results, 59% reported year-over-year growth in quarterly earnings. Full year earnings for 2016 rose to more than $171 billion, an increase of 4.9% compared with 2015, the release stated.
“Revenue and net income were higher, loan balances grew, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall,” FDIC Chairman Martin J. Gruenberg said in the release. “Community banks also reported solid results for the quarter and year with strong net income, revenue and loan growth.
Despite the positive news, Gruenberg noted that the banking industry continues to face challenges.
“Low interest rates for an extended period have led some institutions to reach for yield, which has increased their exposure to interest-rate risk, liquidity risk and credit risk,” he said in the release. “Banks must manage risks prudently to ensure that industry growth is on a long-run, sustainable path.”
Other highlights from the quarterly report include:
• The proportion of banks that were unprofitable in the fourth quarter fell to 8.1% from 9.6% a year earlier;
• Net operating revenue was $181.8 billion in the fourth quarter, up 4.6% from a year earlier;
• Community banks reported a $508 million (10.5%) increase in net income in the fourth quarter;
• Credit card balances increased $38.2 billion (5%) during the quarter, reflecting seasonal holiday spending, while real estate loans secured by nonfarm nonresidential real estate properties rose $22.8 billion (1.7%), and real estate construction and development loans increased $10.1 billion (3.3%); and
• The number of banks on the FDIC’s Problem Bank List fell from 132 to 123 during the fourth quarter, the smallest number of problem banks in more than seven years.
To read more about the fourth quarter Banking Profile, click here.