WASHINGTON The industry's profit in the second quarter rose more than 5% from a year earlier to $40.2 billion as institutions continued to reduce their loan-loss expenses and registered an uptick in loan growth, the Federal Deposit Insurance Corp. said Thursday.
The FDIC's Quarterly Banking Profile attributed the industry's gains to a 22% lower loan loss provision from a year earlier, as well as lower expenses from goodwill impairment and payroll. Goodwill impairment expenses totaled just $192 million, a sharp drop from the $4.4 billion in such expenses a year earlier. Salary and benefit expenses dropped 0.8% as institutions reported over 37,000 fewer employees than from a year earlier.
"A majority of banks 57.5% reported year-over-year increases in quarterly earnings, and only 6.8% of banks were unprofitable, down from 8.4% a year ago," the agency said in its report. "This is the lowest proportion of unprofitable institutions since first quarter 2006."
Meanwhile, even though net operating revenue fell from a year earlier for the fourth straight quarter, net interest income and loan growth were solid.
Net interest income rose 1.9% from a year earlier to $105.4 billion, the biggest such increase in 14 quarters. The FDIC said nearly 72% of all institutions had higher quarterly net interest income than a year earlier. Interest-bearing assets rose 6.4% from a year earlier. And banks reported noticeable loan growth across several categories. Total loans rose 2.3% from the first quarter to $8.1 trillion, the largest quarterly increase since 2007. Commercial and industrial loans grew by 3.1%, residential mortgages grew by 1.2% and credit card balances grew by 3%.
"Net income was up, asset quality improved, loan balances grew at their fastest pace since 2007, and loan growth was broad-based across institutions and loan types," FDIC Chairman Martin Gruenberg said in a press release.
The number of institutions on the agency's "Problem List" fell by 57 to a total of 354, the lowest level in over five years. The Deposit Insurance Fund's balance rose by $2.2 billion to $51.1 billion, and the ratio of that balance to insured deposits grew by 4 basis points to 0.84%.