Banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) enjoyed a strong quarter during 2016’s Q4, seeing an aggregate net income of $43.7 billion.
That’s up $3.1 billion (7.7 percent) from a year earlier, according to the FDIC’s latest quarterly banking profile, released by the organization today. The earnings increase was mainly attributable to an $8.4 billion (7.6 percent) increase in net interest income. Financial results for the fourth quarter of 2016 are included in the FDIC's latest Quarterly Banking Profile released today.
Of the 5,913 insured institutions reporting fourth quarter financial results, 59 percent reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the fourth quarter fell to 8.1 percent from 9.6 percent a year earlier.
Full-year earnings for the banking industry rose $8 billion (4.9 percent) compared to full-year 2015. Net operating revenue was $29 billion (4.2 percent) higher than in the previous year, while itemized litigation expenses at a few large banks were almost $3 billion lower than in 2015. Loan-loss provisions rose to $47.8 billion in 2016, an increase of $10.7 billion (28.8 percent) from 2015.
Community banks are outpacing the industry on the whole, as the 5,461 insured institutions identified as community banks reported a $508 million (10.5 percent) increase in net income in the fourth quarter. Total loan and lease balances at community banks rose $22.4 billion during the fourth quarter. During the past 12 months, loans and leases at community banks rose $115.7 billion (8.3 percent). Net operating revenue of $23 billion at community banks was $1.6 billion (7.6 percent) higher than in the fourth quarter of 2015.
“Revenue and net income were higher, loan balances grew, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall,” said Martin J. Gruenberg, FDIC chairman. “Community banks also reported solid results for the quarter and year with strong net income, revenue, and loan growth.
“Nevertheless, the operating environment for banks remains challenging. Low interest rates for an extended period have led some institutions to reach for yield, which has increased their exposure to interest-rate risk, liquidity risk, and credit risk. Banks must manage risks prudently to ensure that industry growth is on a long-run, sustainable path.”