Anemic loan demand and contracting net interest margins hurt overall profitability for banks with more than $50 billion of assets last year.
Revenue growth for this group of banks — ranked here by their returns on average equity across three years — was a median of 2.84% last year, half as much as it was for 2018.
Their median return on average equity for last year was still in the double digits at 10.19%, but tumbled 111 basis points from the year before.
With the pandemic still going strong, an even more dramatic decline in revenue and profitability is likely this year, said Claude Hanley, a partner with Capital Performance Group, which compiles our annual rankings.
Core deposit growth — at a median of 6.54% — was huge compared with the 0.59% posted in 2018. This surge far exceeded loan growth, which was essentially flat. The median loan growth of 4.10% was just 13 basis points higher than the prior year. As a result of the imbalance, the median loan-to-deposit ratio declined by 230 basis points, to 84.93%.
"This dynamic will become more pronounced in 2020, given the significant influx of deposits that larger banks have experienced since the onset of the pandemic this spring," said Hanley. "And the resulting excess liquidity will put additional pressure on net interest margins."