The U.S. banking system has come a long way since the bottom of the financial crisis — to the tune of five consecutive quarters of earnings that have registered a year-over-year increase.
The Federal Deposit Insurance Corp. Wednesday issued its quarterly report on the commercial banks and savings institutions it insures.
The FDIC reported aggregate net income of $40.3 billion in the first quarter of 2013, a $5.5 billion (15.8 percent) increase from the $34.8 billion in profits that the industry reported in the first quarter of 2012.
Higher non-interest income, lower non-interest expenses, and reduced provisions for loan losses accounted for much of the increase in earnings from a year ago.
Half of the 7,019 insured institutions reporting financial results had year-over-year increases in their earnings.
The group of banks that were unprofitable fell to 8.4 percent, from 10.6 percent a year earlier.
FDIC Chairman Martin J. Gruenberg said: “Today’s report shows further progress in the recovery that has been underway in the banking industry for more than three years. 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.”
However, he also said that “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 average return on assets (ROA), a basic measure of profitability, increased to 1.12 percent from 1.00 percent a year ago. This is the highest quarterly ROA for the industry since the 1.22 percent posted in the second quarter of 2007.