Quarterly Banking Profile Shows Strong Bank Performance in Q4

FDIC-insured banks and savings institutions earned $59.1 billion in the fourth quarter of 2018, an increase of $33.8 billion from the industry’s earnings a year before, the FDIC said today in its Quarterly Banking Profile. The agency attributed the growth to higher net operating revenue and lower income tax expenses.

“With tax reform helping to spur business expansion, banks stepped up to meet increased loan demand from businesses of all sizes,” said ABA Chief Economist James Chessen, noting that business lending picked up 7.8 percent over the year, and total bank lending saw the biggest quarter-over-quarter increase since 2015. “Depositors benefitted from increased competition for funds as banks looked to attract more deposits to supply loan demand.”

Net interest income increased 8.1 percent year-on-year, totaling $140.2 billion. The average net interest margin was 3.48 percent for the quarter — up from 3.31 percent a year ago — as average asset yields grew more rapidly than funding costs. Noninterest income also increased by 2.6 percent year-on-year. Average return on assets was 1.33 percent for the quarter, up 58 basis points from the previous year.

Community banks earned $6.8 billion during the fourth quarter, up 65.1 percent from the same period last year. The agency also reported a 7.7 percent increase in net interest income for this cohort, driven largely by increases in real estate loan income. Community bank noninterest income was $4.7 billion.

Net charge-offs fell 4.6 percent from a year ago. Meanwhile, the noncurrent loan balance rate (which reflects loans 90 days or more past due) was at 0.99 percent, marking the first time since 2007 that the rate has fallen below 1 percent. Meanwhile, the number of institutions on the problem bank list in 2018 fell to 60, eight de novo charters were added, and no banks failed.