Banks report income growth in second quarter

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation reported aggregate net income of $43.6 billion in the second quarter of 2016. That’s an increase of $584 million (1.4%) compared to the same quarter in 2015, according to an FDIC news release.

Of 6,058 insured institutions reporting second quarter financial results, more than 60% reported year-over-year growth in quarterly earnings, according to the release. The proportion of banks that were unprofitable in the second quarter fell to 4.5%, the lowest percentage since the first quarter of 1998. The second quarter financial results were included in the FDIC’s latest Quarterly Banking Profile released Aug. 30.

“Income and revenue both increased from a year ago, loan growth remained strong, the number of unprofitable banks was at an 18-year low, and there were fewer banks on the problem list,” FDIC Chairman Martin Gruenberg said in the release. “Community banks reported strong net income, revenue and loan growth.”

However, Gruenberg noted the industry still faces challenges, including the current low-interest rate environment and continued low energy prices.

“Revenue growth remains sluggish as a prolonged period of low interest rates has put downward pressure on net interest margins,” Gruenberg said in the release. “This has led some institutions to reach for yield, increasing their exposure to interest-rate risk.

“More recently, persistent stress in the energy sector has resulted in asset quality deterioration at banks that lend to oil and gas producers,” he continued. “We likely have not yet seen the full impact of low energy prices on the banking industry, particularly for consumer and commercial and industrial loans in energy-producing regions of the country.”

Community banks posted strong growth in lending and revenues in the second quarter. The 5,602 insured institutions identified as community banks reported a $41.2 billion increase in total loans and leases during the second quarter, according to the release. Net operating revenue of $22.8 billion at community banks was $1.5 billion (7.1%) higher than a year earlier, the release stated.

Loan growth helped lift revenue at most banks, as net interest income rose $5.2 billion (4.8%) compared to the second quarter of 2015, according to the release.

The number of banks on the FDIC’s Problem List fell from 165 to 147 during the second quarter. That is the smallest number of banks on the list in more than seven years and is down significantly from the peak of 888 in the first quarter of 2011, according to the release. Two banks failed during the quarter.

The Deposit Insurance Fund increased $2.8 billion during the second quarter, and the fund’s reserve ratio rose from 1.13% to 1.17% during the quarter, the release stated. Once the reserve ratio exceeds 1.15%, lower regular assessment rates will go into effect, according to the FDIC.

To read more about the FDIC’s Quarterly Banking Profile, read https://www.fdic.gov/news/news/press/2016/pr16073.html.

By |2019-11-25T07:59:32-06:00September 1st, 2016|Financial Services|0 Comments

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