Finally, a milestone that bankers can be (slightly) proud of: more banks made money in the second quarter than in any other quarter over the past five years, according to Keefe, Bruyette & Woods Inc.'s quarterly wrap-up of bank earnings released Tuesday.
The report sampled 165 banks and found that nearly 90% were profitable in the second quarter, up from the 82% in the first quarter. It also noted that the percentage of banks that missed consensus estimates fell slightly, from 26% in the first quarter to 24% at June 30.
Western banks in particular performed best, with 20 out of 25 sampled surpassing consensus estimates, while Southwestern banks were the most lackluster, with only three of eight beat estimates. This is an opposite trend from the first quarter, when Southwestern banks outperformed their counterparts elsewhere.
Though banks' earnings are improving, the report was cautious not to claim a full recovery. It noted that lower provisions for loan losses, not loan growth, largely drove profits.
"Banks still face key challenges including balance-sheet shrinkage, increased regulatory costs, an overall slow economic recovery and a lack of catalysts for sustainable profitability improvement given increased capital requirements and the low-rate environment," the report said.
