FDIC-insured banks and savings institutions earned $79.8 billion in the first quarter of 2023, according to the agency’s most recent Quarterly Banking Profile released today. The profile is the first report released since the failures of Silicon Valley Bank and Signature Bank in March, although FDIC Chairman Martin Gruenberg cautioned in a news conference that it does not fully reflect the effects of those failures on the broader industry. Q1 net income increased by $11.5 billion, or 16.9%, from Q4 2022, but after excluding the income effects of the banks that acquired SVB and Signature, quarter-over-quarter net income was roughly flat, the FDIC said.
The net interest margin of 3.31% was seven basis points lower than a quarter ago, but 77 basis points higher than the year-ago quarter. The NIM was still above the pre-pandemic average of 3.25%, the FDIC said. Total loan and lease balances declined $14.6 billion, or 0.1% from the previous quarter. Loans transferred to the FDIC as receiver, combined with a seasonal decline in credit card loan balances—down $26.6 billion, or 2.6%—were the major contributors to the quarterly decline in total loan balances. Without the loans transferred out of the banking system to the FDIC, loan growth would have been 0.4% quarter over quarter.
“Despite the recent period of stress, the banking industry has proven to be quite resilient,” Gruenberg said. “Net income still remains high by historical measures even after deducting one-time transactions, asset quality metrics are favorable and the industry remains well capitalized. However, these results, especially for earnings, include the effects of only a few weeks of the industry’s stress that began in early March, rather than over the course of the entire quarter. The more lasting effects of the industry’s response to that stress may not become fully apparent until second-quarter results.”
Total deposits were $18.7 trillion, down 2.5% from Q4, the largest reduction reported in the profile since data collection began in 1984, Gruenberg noted. The decline was driven by a reduction in uninsured deposits, which dropped 8.2%, while insured deposits increased by 2.5%. The number of banks on the FDIC’s problem bank list increased by four to 43 banks in Q4, according to the FDIC. Total assets held by problem banks were $58 billion, up $10.5 billion.
ABA: Report showcases banking sector’s continued strength
The QBP demonstrates the resilience of the overall banking sector despite recent stress in the banking system, American Bankers Association Chief Economist Sayee Srinivasan said. Srinivasan noted the report found that in the first three months of the year, the industry weathered the challenges of rising interest rates and the uncertain economy while increasing net income.
“Banks of all sizes have proactively bolstered their capital levels amid extraordinary headwinds, while increasing the reserve coverage ratio to a record level,” Srinivasan said. “Credit quality remains on firm footing as banks tighten their underwriting standards. Even with recent challenges, lending increased 0.4% during the quarter when excluding the transfer of loans to the FDIC. On an annual basis, lending increased 7.5%.”
As anticipated, banks saw deposit outflows during the period, yet insured deposits increased and total deposits remained well above pre-pandemic levels, Srinivasan said. “Overall, the industry remains well-capitalized and highly liquid, allowing banks to continue serving as critical economic drivers. In addition to being the primary source of credit for consumers and businesses, banks are significant national employers. Banks added just over 4,000 positions in the first quarter, with industry employment rising by more than 40,000 year over year to more than 2.1 million people.”