ABA Statement of FDIC’s Third Quarter Bank Earning’s Report

“Robust loan growth was the driving factor behind another strong quarter for America’s banking industry.  Lending served as the primary driver of the growth in bank assets as the bread and butter of banking moves to center stage.  Banks are well prepared to manage what is expected to be a slow and gradual increase in interest rates by the Fed.  This gives institutions ample time to adjust while low interest rates will continue to attract business borrowers.  With solid profitability, continually improving asset quality and strong capital levels, U.S. banks remain well positioned to make the loans that help drive economic growth.”

“Loans increased more than $480 billion year over year as banks continue to make the loans that support job growth. The across-the-board increase in lending continued as businesses and consumers take advantage of historically low interest rates.  There has never been a better time to borrow for businesses eyeing expansion in an improving economy.  As commercial lending grows, it drives new economic activity and creates more employment opportunities.  The increase in lending goes beyond businesses, with consumer lending also expanding. Consumer credit growth reflects the hard work people have done to regain their financial footing after the great recession, which gives them the necessary leeway to responsibly take on a bit more credit.”

“Banks remain highly capitalized at levels far exceeding the most stringent regulatory standards. The U.S. financial system is strong and well-positioned to withstand a gradual increase in rates by the Fed as well as any economic circumstance that could arise.  With solid levels of capital, banks have refocused their efforts on deploying it in support of loan growth that helps strengthen our economy.  Total industry capital is now $1.8 trillion, and with reserves banks have set aside for possible loan losses, there is a total buffer of $1.9 trillion protecting the industry from any economic circumstance that could arise.”

“Asset quality sustained its five-year trend of improvement as cautious behavior on the part of both banks and borrowers continued to pay off.  Loan losses have now returned to pre-crisis lows.  Underwriting standards will naturally adjust to reflect an improving economy and lower risk of lending.  Bank portfolios continue to improve, but sector-specific concerns remain, particularly with the oil and gas sector due to persistently low prices.  Bankers understand that an increase in energy-sector defaults could pose some downside risk and have taken precautionary measures to ensure they’re prepared for any local economic downturn.”