WASHINGTON (5/30/13)--Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. reported aggregate net income of $40.3 billion in the first quarter. That is a $5.5 billion--or 15.8%--increase from the $34.8 billion in profits the industry reported in first quarter 2012, according to the FDIC's most recent Quarterly Banking Profile, released Wednesday.
"Today's report shows further progress in the recovery that has been underway in the banking industry for more than three years," FDIC Chairman Martin J. Gruenberg said Wednesday.
"We saw improvement in asset quality indicators over the quarter, a continued increase in the number of profitable institutions, and further declines in the number of problem banks and bank failures," he added. "However, tighter net interest margins and slow loan growth create an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention."
The first quarter is the 15th consecutive quarter that banks' earnings registered a year-over-year increase. The increase from a year ago was accounted for by rising noninterest income, lower noninterest expenses, and reduced provisions for loan losses. Half of the 7,019 insured institutions reporting financial results had year-over-year increases in earnings. The proportion of banks that were unprofitable fell to 8.4% from 10.6% a year earlier, Gruenberg said.
The average return on assets (ROA)--a basic yardstick of profitability--rose to 1.12% from 1% a year ago. That is the highest quarterly ROA for the industry since the 1.22% posted in second quarter 2007.
First-quarter net-operating revenue--net interest income plus total noninterest income--totaled $170.6 billion, up $2.7 billion (1.6%) from a year earlier. Noninterest income rose $5.1 billion (8.3%) and net interest income declined by $2.4 billion (2.2%). The average net interest margin fell to its lowest level since 2006. Total noninterest expenses were $5.3 billion (3.9%) below the level of the first quarter of 2012. Banks set aside $11 billion in provisions for loan losses, a reduction of $3.3 billion (23.2%), compared with a year earlier.
Asset-quality indicators continued to improve. Banks and thrifts charged off $16 billion in uncollectible loans during the quarter, down $5.8 billion (26.7%) from a year earlier. The amount of noncurrent loans and leases--those 90 days or more past due or in nonaccrual status--fell by $15.7 billion (5.7%) during the quarter, and the percentage of loans and leases that were noncurrent declined to the lowest level since 2008.
To read the FDIC's most recent complete Quarterly Banking Profile, use the link.