FDIC: Banks’ net income down but sector shows signs of strength

FDIC-insured banks and thrift associations earned $64.4 billion in the second quarter of 2022, down 8.5% from a year earlier, the FDIC announced today in his Quarterly banking profile. This decrease is due to an increase in provision charges. Still, Acting FDIC Chairman Martin Gruenberg said the banking industry reported generally positive results for the quarter, but added that going forward, “downside risks from inflation , rising interest rates, slowing economic growth and the persistence of the pandemic and geopolitical uncertainties will continue to challenge bank profitability.” , credit quality and loan growth.

The average net interest margin rose 26 basis points from the previous quarter to 2.8%, the strongest quarterly growth since the first quarter of 2010, according to the report. Most banks (70.5%) reported higher net interest income than a year ago. Total loan and lease balances increased 3.7% from the previous quarter, with growth in several loan portfolios, including family residential loans, commercial and industrial loans and consumer loans. Community banks reported a drop in net profit of $523 million from a year ago.

At the same time, the average net imputation rate fell 4 basis points year-on-year to 0.23. During the second quarter, six banks opened and none failed. The number of banks on the FDIC’s problem bank list remained steady at a record high of 40.

American Bankers Association chief economist Sayee Srinivasan said the FDIC’s assessment reveals a strong banking sector that continues to support the economy through difficult times, noting that the report shows that bank lending experienced the largest year-over-year increase in 14 years. Srinivasan, however, pointed out that “total deposits fell for the first time in four years, signaling that the unprecedented surge since the start of the pandemic is beginning to wane.”

“With FDIC-insured deposits declining at an annualized rate of 2.8% in the second quarter, the FDIC should reconsider its proposal to increase bank assessments, which assumed elevated deposit balances would continue,” he said. declared. “The new data suggests that the proposed valuation increase is not necessary to ensure that the insurance fund achieves the statutory target of 1.35% by September 2028.”

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