US banks have enjoyed their best quarter since the onset of the financial crisis.
Collective net income for the three months to 31 March totaled $29bn, a 66.5% increase from the same period last year and the best quarterly result since the second quarter of 2007.
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The first quarter represented the seventh consecutive quarter US bank earnings have registered year-over-year gains.
More than half of all institutions (56.2%) reported improved earnings and fewer institutions were unprofitable compared with last years first quarter: 15.4% versus compared to 19.3%.
Although the number of failed institutions has fallen substantially 157 to 26 year-on-year, the number of problem institutions has actually increased by 4 on the year ago quarter to 888.
Provisions for loan losses fell by 60% to $20.7bn in the first quarter, the sixth consecutive quarter that loss provisions have declined year-on-year.
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Number of problem banks highest ever
Net loan charge-offs declined for a third consecutive quarter. FDIC-insured institutions charged-off $33.3bn in the first quarter, 37.5% less than a year ago.
Total employment at FDIC-insured lenders in the first quarter rose by 3.2% year-on-year to 2.09m full-time equivalent employees.
First quarter metrics were not all positive, however: The number of lenders on the FDICs confidential problem list reached its highest figure 888, up by four on the year ago quarter since the fourth quarter of 1993.
Assets of problem banks increased from $390bn last quarter to $397bn.
Other negative metrics included:
- A decline in net interest income, which was down by 3.2% year-on-year – the first such reduction since the last quarter of 1989 – due to narrower net interest margins; and
- A fall in non-interest income by 3.7% year-on-year, which reflected lower revenues from service charges on deposit accounts and reduced trading income.
Net operating revenues down at largest lenders
Much of the reduction in net operating revenue was concentrated at larger institutions: Six of the largest 10 US financial institutions reported year-over-year declines in net operating revenue, six reported a decline in non-interest income and eight reported lower net interest income.
Total assets of insured institutions increased by 0.7% during the quarter. Total loan and lease balances continued to fall, declining by 1.7% the fifth-largest quarterlymage decline in loan balances in the past 28 years for which data is available.
This decline also marked the 10th time in the last 11 quarters that reported loan balances have fallen. The largest declines in loan balances were in retail mortgages, which fell by 3.4%, and credit card loan balances, down by 5.5%.
Deposits at FDIC-insured institutions increased by 1.9% from a year ago.
