Cheat sheet: What bankers need to know from FDIC's 2Q report card
August 22, 2017 3:53 PM
Another quarter, another record
Bank profits continue to sail ever higher, reaching $48.3 billion during the second quarter, their highest level since the financial crisis. Nearly two-thirds of all banks earned more year over year.
Operating income
Bank profits were largely driven by a big jump in net interest income, which rose 9%, or $10.3 billion. Noninterest income was up too, but only by 1%.
Coverage ratio
The coverage ratio, measuring loan-loss reserves compared with noncurrent loans and leases, rose to 104.3% from 97.5%, the highest post-crisis level ever.
Loan growth
Despite near record profits, loan growth continues to lag, raising concerns for bankers and policymakers alike. The rate of annual loan growth slowed for a third consecutive quarter, with total loans and leases rising just 1.7%, or $161.2 billion, from the first quarter.
Year over year, loans rose by 3.7%, compared with a 6.6% increase logged over 2015.
Year over year, loans rose by 3.7%, compared with a 6.6% increase logged over 2015.
Chargeoffs
Those looking for a dark side to the second-quarter earnings could find it in the large number of credit card chargeoffs. They jumped 24% year over year year and accounted for 64% of banks' chargeoffs in the quarter.
Interest rate risk
Another area for concern was the high rate of long-maturing loans and securities maintained by banks. The proportion of assets with a three year or more maturity timeline stagnated at 35.4%, remaining close to the all-time high of 35.5% reached two quarters ago.
“Banks have been extending maturities to increase yields and maintain margins in a low-rate environment,” said FDIC Chairman Martin Gruenberg. “However, this has left many institutions vulnerable to interest rate risk.”
“Banks have been extending maturities to increase yields and maintain margins in a low-rate environment,” said FDIC Chairman Martin Gruenberg. “However, this has left many institutions vulnerable to interest rate risk.”
Dwindling numbers
The number of banks continues to fall, and that trend is unlikely to turn around soon. The banking industry has argued it needs to be easier to charter de novos, but FDIC Chairman Martin Gruenberg said it's difficult to start banks in such a prolonged low interest rate period.
