U.S. commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $43 billion in the second quarter of 2015, the highest quarterly income on record, the FDIC said Tuesday.
The second-quarter figure is up $2.9 billion (7.3 percent) from a year earlier, a sign that the economic recovery is helping bolster financial institutions.
The FDIC attributes the increase in earnings mainly to a $3.6 billion rise in net operating revenue (net interest income, plus total noninterest income). The jump in income is mainly from interest-generating lending assets and businesses that don’t rely on interest, such as trading.
However, the earnings growth doesn’t reflect banks’ net interest margin, a key barometer of lending profitability. That profit potential remains depressed as the Federal Reserve has maintained its near-zero federal funds rate for seven years. That will likely start to change when the Fed moves to raise rates, possibly later this year.
Of the 6,348 insured institutions in the second quarter of 2015, more than half (58.7 percent) reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable during the second quarter fell from 6.8 percent a year earlier to 5.6 percent, the lowest since the first quarter of 2005.
“Bankers generally reported another quarter of higher earnings, improved asset quality, and increased lending,” said FDIC Chairman Martin J. Gruenberg. “There were fewer problem banks, and only one bank failed during the second quarter.
However, Gruenberg added, the low interest-rate environment remains a challenge. “Many institutions have responded by acquiring higher-yielding, longer-term assets, but this has left banks more vulnerable to rising interest rates and that is a matter of ongoing supervisory attention,” he said.