OCC: U.S. banks remain resilient

The federal banking system remains resilient despite a recent dip in profitability as pandemic-related economic aid phased out, with banks able to use that strength to support their customers and the national economy, the Office of the Comptroller of the Currency said today in its annual report to Congress. The document provides an overview of the condition of the federal banking system, OCC’s strategic priorities and initiatives, and the agency’s financial management and condition.

As of Sept. 30, 2022, the federal banking system comprised 1,084 banks operating in the U.S., according to the report. Fewer than 776 banks have less than $1 billion in assets, while 55 have more than $10 billion. Excluding federal branches and agencies of foreign banks, banks in the system hold $15.2 trillion of all assets of U.S. commercial banks (64% of the total assets held by all U.S. commercial banks) and more than 74.5% of credit card balances in the country.

Following a sharp rebound in 2021, system profitability declined to 1% of average assets by June 2022, down from 1.3% in the prior year, the OCC said. “Many of the temporary, pandemic-related boosts to income—such as fees associated with the Paycheck Protection Program, gains on sales of loans, and chiefly, provisioning—are normalizing or phasing out, which has placed a drag on net income for all banks.” Still, the agency noted that at the first half of 2022, banks remained well capitalized, above their pre-pandemic long-term average, at 8.5% of average total assets.

The report also noted the OCC supervises almost 900 community institutions with diverse business models, adding that the agency is taking steps “to preserve this diversity.” Those include reducing assessment fees for community banks, working to streamline the licensing process for new banks, and updating its approach to risk-based supervision to best focus examination resources, according to the agency. “The OCC has committed to being diligent in clearly differentiating regulatory expectations for banks based on their size and complexity,” the report said.