WASHINGTON U.S. banks rebounded in the first quarter as earnings rose 6.9% from a year earlier, to $39.8 billion, and nearly two-thirds of institutions reported higher profits from a year earlier, the Federal Deposit Insurance Corp. said Wednesday.
The FDIC's Quarterly Banking Profile showed that net operating revenue rose $4.3 billion, or 2.6%, from the first quarter a year ago, boosted by a 4.6% rise in noninterest income to $62.7 billion. Trading revenue surged 23.9% to $1.5 billion and income from selling, securitizing and servicing of residential real estate loans rose 15.6% or $545 million.
Community banks also continued to outpace the industry as a whole, with earnings increasing 16% from the first quarter of 2014 to $4.9 billion. The combination of lower loan loss reserves and higher noninterest and interest income contributed to the strong performance for community banks.
Despite the improvement in earnings, FDIC Chairman Martin Gruenberg said the low interest rate environment continues to pose a challenge for the industry.
"Net interest margins continued to decline during the quarter, even as banks reached for yield to offset the impact of low rates," Gruenberg said.
Net interest income for the industry as a whole rose 1.5% to $105.7 billion, in the first quarter compared with the same quarter a year ago. Total loan and lease balances rose 0.6% or $52.5 billion in the quarter.
Banks set aside $8.4 billion in loan loss provisions. That was a $756 million, or 9.9%, increase from the first quarter. The annualized net charge-off rate fell to 0.43%, which was the lowest rate since 2006.
The number of institutions on the agency's "Problem List" fell by 38 to a total of 253, marking the 16th consecutive quarterly decline. The Deposit Insurance Fund's balance rose by $2.5 billion to $65.3 billion as of March 31. The ratio of that balance to insured deposits grew by 2 basis points to 1.03%, which is the highest it has been since March 2008.