Credit & Capital

Bank Profits Surge 8.7% to $60.7 Billion in Q1

Boosted by a 6% gain in net interest income, the industry's strong Q1 performance followed a record year in 2018.
Matthew HellerMay 29, 2019
Bank Profits Surge 8.7% to $60.7 Billion in Q1

U.S. banks’ profits jumped 8.7% in the first quarter of 2019, driven in large part by growth in interest income.

In its latest quarterly banking profile, the Federal Deposit Insurance Corp. said federally-insured commercial banks and savings institutions reported aggregate net income of $60.7 billion in the first quarter of 2019, up $4.9 billion from a year earlier.

Net interest income rose $7.9 billion (6%) to $139.3 billion, with 79.3% of banks reporting an improvement from a year earlier. Average net interest margin — the amount banks earn from interest against the amount they pay out — grew to 3.42% from 3.32% a year ago.

“The banking industry reported another positive quarter,” FDIC Chairman Jelena McWilliams said in a news release, noting that “Net interest margins improved, asset quality indicators remained stable, and the number of ‘problem banks’ continued to decline.”

“Community banks also reported a strong quarter, with annual loan growth and a net interest margin surpassing the overall industry,” she added.

The banking industry’s strong first-quarter performance followed a record year in 2018, when net income rose 44.1% to $237 billion. But McWilliams cautioned that banks must remain prudent amid current interest rate trends.

“With a historically low interest-rate environment and strong competition to attract lending, some institutions have ‘reached for yield,’ which limited net interest margin expansion,” she noted. “With the recent stabilization of interest rate hikes, some institutions may face new challenges in lending and funding. Therefore, banks must maintain prudent risk management in order to support lending through this economic cycle.”

The FDIC also reported that the average return on assets rose to 1.35% in the first quarter from 1.28% a year earlier. It said asset quality remains “stable” despite a 0.5% increase in loans that were 90 days or more past due.

The number of “problem banks,” meanwhile, fell from 60 to 59, the smallest number since the first quarter of 2007.