Largely driven by the economic disorder that followed in the wake of the coronavirus crisis, the nation’s banks saw their net income drop off more than 36% – nearly $85 billion – by year-end 2020 from the previous year, the federal insurer of bank deposits said Tuesday.
In a release, the Federal Deposit Insurance Corp. (FDIC) said net income was $147.9 billion at year-end 2020 for the nation’s 5,001 institutions insured by the agency – 36.5% lower than that reported at year-end 2019 (at $232.8 billion).
“The decline was primarily attributable to higher provision expenses in the first half of 2020, related to the decline in economic conditions,” the FDIC said. The economic impact of the COVID-19 pandemic became apparent in the first half of last year.
The agency also noted that the average return-on-assets (ROA) ratio declined from 1.29% in 2019 to 0.72% in 2020 – the lowest since at least 2014.
FDIC Board Chairman Jelena McWilliams, in a statement, noted that although full-year statistics for banks were lower than the previous year, fourth-quarter numbers showed improvements. She said banks “remained resilient” in the fourth quarter, “consistent with the improving economic outlook.”
“Fourth quarter net income rose, primarily due to lower provision expenses for credit losses and higher noninterest income,” she said. “Net interest margin was unchanged from the record low level reached last quarter. Deposit growth accelerated in the fourth quarter, reflecting persistently high savings rates and lower spending. Banks reported modest declines in asset quality and loan volume.”
Net interest margin – the amount of money the banks earned on loans and other investments relative to the amount they paid in interest – stood at 2.82% at year’s end, well below the 3.36% posted at year-end 2019 and the lowest mark since at least 2014, the agency reported.
Net operating income at the banks dropped off by more than 38%, the FDIC reported in 2020 – again, the lowest growth in at least seven years and well below the 45.4% growth seen as recently 2018 (the FDIC reported net operating income in 2019 of -3.14%).
The number of problem banks at year-end 2020 had risen slightly to 56 institutions from 51; total assets in the problem institutions was $56 billion at year-end, up from total year-end 2019 of $49 billion.