Magazine article American Banker

Bump in Interest Income Makes Up for Slower Asset Growth: FDIC

Magazine article American Banker

Bump in Interest Income Makes Up for Slower Asset Growth: FDIC

Article excerpt

Byline: Ian McKendry

WASHINGTON -- Banks earned $47.9 billion in the third quarter, a 5.2% year-over-year increase, the Federal Deposit Insurance Corp. said Tuesday in the release of the Quarterly Banking Profile.

The overall improvement in net income was largely attributed to better net interest income, which increased 7.4% year over year, boosted by an improvement in the average net interest margin. The industry's net interest margin rose from 3.18% in the third quarter of 2016 to 3.30%.

Almost two out of three banks reported higher net interest margins compared with the third quarter of 2016, the agency said.

However, noninterest income fell 1% as gains on loan sales fell $1.1 billion and servicing fee income was down $290 million. But income from fiduciary activities increased $612 million.

The industry's overall return on assets was 1.12%, versus 1.10% a year earlier.

Bank earnings were down slightly from $48.1 billion in the second quarter. Even though total assets increased by $168.8 billion, or 1%, during the quarter, asset growth slowed for the fourth consecutive quarter. However, asset growth rose 2.8% year over year.

"While overall performance improved from the prior year, the interest rate environment and competitive lending conditions continue to pose challenges for many institutions," said FDIC Chairman Martin Gruenberg. "In addition, with the economy in the ninth year of an expansion that has been characterized by modest economic growth, the annual rate of loan growth has slowed in recent quarters. …

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