Banks’ net income up 79.5% from Q4 2023; CRE, credit cards deteriorate further

A mixed bag of results from federally insured banks’ first-quarter all reports included a strong rise in overall net income, overall good asset quality, but ongoing deterioration in commercial real estate (CRE) and credit card portfolios, the federal bank deposit insurer showed in data released Wednesday.

The Federal Deposit Insurance Corp. (FDIC) said reports from 4,568 insured commercial banks and savings institutions showed aggregate net income of $64.2 billion in first quarter 2024, an increase of $28.4 billion, of 79.5%, from the fourth quarter of 2023. The increase was attributed primarily to a $22.5 billion, or 13.3%, decline in noninterest expense.

The FDIC said a decline in the expense related to the special deposit insurance assessment (on large banks only, to help make up for the FDIC Deposit Insurance Fund’s losses related to last year’s failures of three regional banks) accounted for more than half of the decline in noninterest expense. Also contributing to the large net income increase was growth in noninterest income, which was up $10.3 billion, or 15.2%; and a decrease in provision expenses, which declined $4.3 billion, or 17.3%.

The banking industry reported an aggregate return-on-assets ratio (ROA) of 1.08 percent in first quarter 2024, up from 0.61 percent in fourth quarter 2023 but down from 1.36% in first quarter 2023.

In other results, the FDIC said:

  • The aggregate return-on-assets ratio (ROA) was  1.08% in the first quarter of 2024, up from 0.61% in fourth quarter 2023 but down from 1.36% in first quarter 2023.
  • Community bank net income: Community banks, which numbered 4,128, saw $6.3 billion in net income in the first quarter, up $363.2 million, or 6.1%, from fourth quarter 2023. “Lower realized losses on the sale of securities and lower noninterest and provision expenses more than offset lower noninterest and net interest income,” the agency said.
  • Community bank ROA: The community bank pretax ROA increased six basis points in the quarter to 1.13%.
  • Net interest income: The industry’s net interest margin (NIM) was down for the second consecutive quarter, dropping 10 basis points 3.17% in the first quarter. The period saw continued growth in funding costs as yield on earning assets declined. First-quarter NIM was seven basis points below the pre-pandemic average NIM.
  • Community bank NIM: NIM for community banks was 3.23%, down 12 basis points from fourth quarter 2023; and 41 basis points from its pre-pandemic average.
  • Asset quality: Loans 90 days or more past due or in nonaccrual status increased to 0.91% of total loans, up five basis points from the prior quarter and 16 basis points from the year-ago quarter.  The quarterly increase was led by commercial and industrial loans and non-owner-occupied CRE loans. The noncurrent rate for non-owner occupied CRE loans was 1.59% in the first quarter, its highest level since fourth quarter 2013, driven by office portfolios at the largest banks. The industry’s total noncurrent ratio remains 37 basis points below the pre-pandemic average of 1.28%. The  industry’s net charge-off rate was 0.65%, unchanged from first quarter 2023 but 24 basis points higher than a year ago. This ratio remains 17 basis points above the pre-pandemic average. The credit card net charge-off rate was 4.70%, up 55 basis points from fourth quarter 2024 and still its highest rate since third quarter 2011.

FDIC-Insured Institutions Reported Net Income of $64.2 Billion

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