FDIC Says Market Volatility Drove Large Banks’ Q1 Earnings Growth

FDIC-insured commercial banks and savings institutions reported that their aggregate net income increased 3.6% in the first quarter compared to the previous quarter and reached $80.5 billion, the Federal Deposit Insurance Corporation (FDIC) said Wednesday (May 27).

The regulator shared these figures in a press release highlighting findings from its latest Quarterly Banking Profile, which summarizes financial reports of 4,278 institutions.

These institutions reported a return on assets (ROA) ratio of 1.26% during the first quarter, according to the release.

“The banking industry continued to maintain strong capital and liquidity levels, which support lending and protect against potential losses,” the FDIC said in the release.

FDIC Chairman Travis Hill said during a Wednesday press briefing that this “was another strong quarter” and that the ROA and net income figures have been around those levels for several quarters in a row.

“This quarter, the earning growth was driven by noninterest income, which grew particularly at the largest banks due to market volatility, which was partly due to the conflict in Iran,” Hill said.

Noninterest income grew 5.8% and was partially offset by higher noninterest expense, which increased 1.6%, and lower net interest income, which declined 0.8%, according to a statement released Wednesday.

The Quarterly Banking Profile also found that during the first quarter, compared to the previous quarter, industry net interest margin declined 8 basis points to 3.31% with earning asset yields declining faster than funding costs; domestic deposits grew 2.1%, marking the seventh consecutive quarterly increase; and loan growth increased 1.6%, according to the release.

“Asset quality metrics remained generally favorable, though some commercial real estate and consumer portfolios continue to have elevated delinquency rates,” the FDIC said in the release.

The report also found that the FDIC’s Deposit Insurance Fund reserve ratio increased 1 basis point to 1.43%, per the release.

The number of banks on the regulator’s “Problem Bank List” declined by six during the first quarter and stood at 54 at the end of the quarter, according to the FDIC’s statement. Three banks opened and one bank failed during the quarter.

“The number of problem banks was 1.3 percent of total banks, which is in the normal range of 1 to 2 percent for non-crisis periods,” the FDIC said in its statement.