The banking industry demonstrated resilience after a period of stress in early 2023 as full-year net income remained high, overall asset quality metrics were favorable and liquidity stabilized, the FDIC said today in its annual Risk Review of the banking sector. Among other things, the agency said that problem banks accounted for 1.1% of all banks at the end of 2023, “which is near the low end of the typical range for non-crisis periods.”
The report identified several areas of risk for banks. Most commercial real estate markets were resilient in 2023, but markets for office and retail malls were weak, the FDIC said. High mortgage rates contributed to a slowdown in housing activity last year, but housing prices increased as the supply of homes for sale remained tight. Consumer loan growth at banks slowed as banks tightened lending standards and households reduced their demand for loans. Inflation and a tight labor market have created challenges for small businesses, but steady consumer spending has helped. Ransomware and supply chain attacks continue to threaten banks and third parties, and geopolitical events continue to increase the likelihood of cyberattacks on banks, the agency said.
