Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $47.9 billion in Q3/17, up $2.4 billion (5.2%) from a year earlier.
The increase in earnings was mainly attributable to an $8.8 billion (7.4%) increase in net interest income.
Of the 5,737 insured institutions reporting third quarter financial results, 67.3% reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the third quarter fell to 3.9% from 4.6% a year earlier.
“Third quarter results for the banking industry were largely positive,” FDIC Chairman Martin J. Gruenberg said. “Revenue and net income were higher at most banks, net interest margin improvement was widespread, and the number of unprofitable banks and ‘problem banks’ continued to fall. Community banks also reported another solid quarter of revenue, net income and loan growth.
“While the quarterly results were largely favorable, the industry continued to see a gradual slowdown in the annual rate of loan growth. In addition, the operating environment for banks remains challenging. An extended period of low interest rates and an increasingly competitive lending environment have led some institutions to reach for yield. This has led to heightened exposure to interest-rate risk, liquidity risk and credit risk. These risks must be managed prudently for the industry to continue to grow on a long-run, sustainable path.”
Highlights from Q3/17
The FDIC’s problem bank list fell from 105 to 104 during Q3/17. This is the smallest number of problem banks since the first quarter of 2008, and is almost 90% less than the post-crisis peak of 888 in Q1/11. Total assets of problem banks fell from $17.2 billion to $16.0 billion during the quarter.
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