WASHINGTON The banking industry earned a record profit for the second straight quarter as growth in noninterest income continued to make up for a slow recovery in the lending sector, the Federal Deposit Insurance Corp. reported.
FDIC-insured institutions earned a total of $42.2 billion in the second quarter, a 23% increase from the quarterly income posted a year earlier and a 4.7% increase from the previous record of $40.3 billion reported in the first quarter.
But with loan growth still sluggish, the FDIC again attributed the earnings growth largely to lower loan loss provisions and higher noninterest income, particularly trading income. Banks are beginning to see clear effects from fluctuating interest rates, the FDIC noted.
"Asset quality continues to recover, loan balances are trending up, fewer institutions are unprofitable, the number of problem banks is down, and the number of failures is significantly below levels of a year ago," FDIC Chairman Martin Gruenberg said in a statement prepared for the release of the Quarterly Banking Profile. "However, industry revenue growth remains weak, reflecting narrow margins and modest loan growth. And the current interest rate environment creates an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention. Nonetheless, overall these results show a continuation of the recovery in the banking industry."
The industry's average quarterly ROA was 1.17%, which is well above the 0.99% return of a year earlier, but below the 1.27% average from 2000 through 2006. Nearly 54% of all banks reported higher quarterly income than a year earlier, and slightly more than 8% reported a loss.
As noninterest income rose 11% from a year earlier to $66.9 billion, net operating revenue totaled $170.6 billion, a 3% increase from a year earlier. Trading-related income rose more than 238% compared with a year earlier. But that was coupled with a 1.7% year-over-year decline in net interest income to $103.7 billion, the third such decline in a row.
