FDIC: Banks showed continued strength in 2022

FDIC-insured banks and savings institutions earned $68.4 billion in the fourth quarter 2022, a decrease of $3.3 billion, or 4.6%, from the third quarter, according to the agency’s most recent Quarterly Banking Profile released today. The banking industry’s full-year net income in 2022 was $263 billion, a decline of $16.1 billion, or 5.8%, from the historically high levels reported in 2021, but still greater than its earnings before the pandemic, FDIC Chairman Martin Gruenberg said. Community banks reported annual earnings of $30.4 billion in 2022, down 0.3% from the previous year.

The net interest margin increased 23 basis points from a quarter ago and 82 basis points from a year ago to 3.37%—the largest year-over-year increase in the history of the QBP. Total loan and lease balances increased by 8.7% year over year, or $979.9 billion, driven by growth in commercial and industrial loans (up 9.7%), one-to-four-family residential mortgages (up 9.8%) and consumer loans (up 10%). Net income for community banks ticked up a slight 0.4%, or $33 million, from the previous quarter.

“The banking industry reported continued positive results amid persistent economic uncertainty,” Gruenberg said. “Net interest income grew, loan growth continued and asset quality measures remained favorable despite modest deterioration.” He added that the overall decline in net income in 2022 was driven primarily by higher provision expenses—the amount set aside by institutions to protect against future credit losses.

The number of banks on the FDIC’s problem bank list decreased by three to 39 banks in Q4, according to the FDIC. Total assets held by problem banks declined $116.3 billion to $47.5 billion. The number of problem banks is at the lowest level since QBP data collection began in 1984, with no bank failures occurring in Q4, Gruenberg said. “There has now not been a bank failure in 28 months, three short of the record of 31 months set in 2007,” he said.

ABA: Report shows banks continue to support customers, businesses

The QBP shows that the banking sector remains strong amid continued economic uncertainty, American Bankers Association Chief Economist Sayee Srinivasan said. He noted that the report found that in the final three months of 2022, the industry continued to support consumers as well as large and small businesses through near-record annual loan growth.

“Credit quality remained above pre-pandemic levels despite elevated inflation, but given the uncertain economic outlook, banks have been prudently shoring up loan-loss provisions,” Srinivasan said. “Banks have increased provisioning by more than 87% to $20.7 billion over the past two quarters as they continue to monitor delinquency trends.”

“As FDIC Chairman Gruenberg noted, the banking industry remains well-capitalized and highly liquid,” he added. “That strength will help the nation’s banks weather potential headwinds as inflation and geopolitical risk persist.”