Bank net op income rebounds in 2021, increasing nearly 90% from previous year to $279 billion

Banks’ net operating income was up nearly 90% in 2021 from the previous year, the federal insurer of bank deposits said Tuesday, as the institutions reported $279.1 billion in the income category at year’s end.

According to the Federal Deposit Insurance Corp. (FDIC), the nation’s 4,839 commercial banks and savings institutions reported only $147.1 billion in net operating income in 2020.

While overall last year banks made copious improvements to their net income positions, the FDIC numbers indicate that growth slowed some in the fourth quarter. According to the year-end figures (outlined in the agency’s Quarterly Banking Profile, or QBP), while a majority of banks (52.1%) reported annual improvement in quarterly net income, net income declined $5.6 billion (8.1%) in the fourth quarter from the previous period. The agency said that was driven by a quarter-to-quarter increase in provision expense (up $4.5 billion to negative $742.4 million).

Nevertheless, bank profitability in 2021 improved dramatically from the previous year, which hosted the initial impact of the coronavirus crisis. The agency said average return on assets (ROA) – described sometimes as the basic yardstick of bank profitability – rose to 1.23% in 2021, up from 0.72% the previous year.

In other areas, the FDIC reported:

  • Lending increased at banks from the previous year, with lending and lease balances up by 3.5% to $383.2 billion. The agency cited growth in consumer loans (up $137.8 billion, or 7.9%), loans to nondepository institutions (up $124.5 billion, 21.5%), and nonfarm nonresidential commercial real estate (CRE) loan balances (up $77.0 billion, 4.9%) as leading the lending growth. However, the agency said lending was down in commercial and industrial (C&I) $126.7 billion (5.2%). The FDIC blamed the C&I loan decline on Paycheck Protection Program (PPP) loan forgiveness and repayment. The PPP was an effort to help small businesses weather the financial impact of the coronavirus crisis and keep workers employed.
  • Credit quality continued to improve, as shown by a decline in the net charge-off balance, down $5.6 billion, (49.5%) from a year ago.
  • The reserve ratio for the agency’s Deposit Insurance Fund (DIF) was 1.27%, unchanged from the previous quarter. The fund’s balance was $123.1 billion as of Dec. 31, up $1.2 billion from the end of the third quarter.
  • Bank mergers continued in the fourth quarter, with 72 institutions merged and no banks having failed in fourth quarter 2021.

FDIC-Insured Institutions Reported Net Income of $63.9 Billion in Fourth Quarter 2021