The banking industry reported full-year 2023 net income of $256.9 billion, down $6 billion, or 2.3%, from the prior year, but still well above the pre-pandemic average, according to the FDIC’s most recent Quarterly Banking Profile, released today. The report also showed that FDIC-insured banks and savings institutions earned $38.4 billion in the fourth quarter of 2023, a decline of $30 billion from the third quarter.
Higher noninterest expenses, lower noninterest income and higher provision expense drove the Q4 decline in net income, the FDIC said. However, the agency estimated that 70% of the decrease in net income was caused by specific, nonrecurring, noninterest expenses at large banks. Those expenses included the special assessment to recover the loss to the Deposit Insurance Fund resulting from the agency’s decision to protect uninsured depositors following the Silicon Valley Bank and Signature Bank failures.
Quarterly net income for the 4,140 community banks insured by the FDIC fell to $5.9 billion in Q4, a decline of $650.2 million, or 9.9%. Higher noninterest and provision expense drove the decline in earnings, the FDIC said.
Domestic deposits increased $186.9 billion, or 1.1%, in Q4, the first quarterly increase in domestic deposits in seven quarters. Estimated insured deposits were up $46.6 billion, or 0.4%. The DIF balance increased by $2.4 billion to $121.8 billion, largely reflecting increased assessment revenue. The reserve ratio increased two basis points to 1.15%.
Also during Q4, the total number of FDIC-insured institutions declined by 27 banks to 4,587. One bank opened, one bank failed, four banks did not file a Call Report after selling a majority of their assets to credit unions, and 23 institutions merged with other banks during the quarter. The number of problem banks rose from 44 to 52.
ABA: Latest QBP demonstrates that banking industry is resilient
The FDIC’s latest QBP shows that the banking industry has remained resilient while continuing to serve as a critical economic driver, American Bankers Association Chief Economist Sayee Srinivasan said. He noted that the report shows that deposits increased at banks of all asset sizes in Q4, and that loan growth continued as banks supported their business and consumer customers.
“While the FDIC’s special assessment drove a decline in net income in the fourth quarter, the industry maintained positive year-over-year revenue growth,” Srinivasan said. “Even as delinquencies continued to normalize to historical levels, asset quality for the industry remained sound. Banks took prudent steps to increase loan-loss provisioning to ensure preparedness if the economy were to slow.
“Banks remain well capitalized and well-positioned to continue supporting their customers even in the face of some economic headwinds,” Srinivasan added.
