Banks reported $256.9 billion in first-quarter net income,
representing a $30 billion (43.9 percent) drop from the fourth quarter of 2023
and a year-over-year decrease of $6 billion (2.3 percent), according to the
Federal Deposit Insurance Corp.’s (FDIC) latest Quarterly Banking Profile.
The agency estimated that about 70 percent of the drop-off
was attributed to specific, nonrecurring, noninterest expenses at large banks,
which offset net operating revenue growth.
Overall net income remained well above the pre-pandemic
average despite the decline, and more than 85 percent of banks reported annual
loan growth, driven by a $63.1 billion (6 percent) increase in credit card
loans.
“The banking industry has shown resilience after a period of
liquidity stress in early 2023,” FDIC Chair Martin Gruenberg said in a
statement. “Full-year net income remained high, overall asset quality metrics
were favorable, and the industry’s liquidity was stable. However, ongoing
economic and geopolitical uncertainty, continuing inflationary pressures,
volatility in market interest rates, and emerging risks in some bank commercial
real estate portfolios pose significant downside risks to the banking industry.
These issues, together with funding and earnings pressures, will remain matters
of ongoing supervisory attention by the FDIC.”
Delinquency rates trended higher but stayed below the
pre-pandemic average, according to the report. The percentage of
noncurrent loans (90 days or more past due or in nonaccrual status) increased
to 0.86 percent, up four basis points from the previous quarter. The share of
total loans that were 30-89 days past due increased to 0.61 percent, an
increase of seven basis points, quarter-over-quarter.
The uptick in the noncurrent loan rate was driven by credit
cards and nonfarm, nonresidential commercial real estate loans. Residential
mortgages drove the quarterly increase in the share of loans 30-89 days past
due.
“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,” American Bankers Association Chief Economist Sayee Srinivasan
said in a statement. “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.”
The net interest margin (NIM) saw a drop of two basis points
to 3.28 percent in the fourth quarter as deposit and non-deposit liability
costs increased and more than outpaced the increase in asset yields. Despite
the drop, the overall NIM remained three basis points above the pre-pandemic
average NIM of 3.25 percent. The community bank NIM of 3.35 percent was
unchanged from the previous quarter but remained 28 basis points lower than its
pre-pandemic average.
Among the 4,140 community banks insured by the FDIC,
quarterly net income dropped by $650.2 million (9.9 percent) to $5.9 billion in
the fourth quarter, driven by higher noninterest and provision expenses.
However, net operating revenue saw a modest increase from the prior quarter.
The Deposit Insurance Fund (DIF) balance also grew in the
fourth quarter, reaching $121.8 billion, with the reserve ratio increasing to
1.15 percent.