Net income was down 8.6% at the nation’s banks in the third quarter, but that decrease came mostly from one-time gains on equity security transactions reported in the previous quarter, according to the federal insurer of bank deposits.
Also, the Federal Deposit Insurance Corp. (FDIC) reported that return on assets (ROA) at banks – while coming in at 1.09% at the end of the third quarter – was down 11 points from the previous quarter and eight points from the year before. ROA is often described as the “basic yardstick of bank profitability” by regulators, including the FDIC.
Still, the FDIC described the third-quarter numbers as the banking industry continuing to “show resilience,” with net interest income and the net interest margin increasing “substantially” (by $4.5 billion and 3.23%, respectively) this quarter over the previous.
The agency also noted some “weakness” in certain asset categories. The FDIC said past-due and nonaccrual (PDNA) loans (those 30 or more days past due or in nonaccrual status) increased six basis points from the prior quarter to 1.54% of total loans. (The FDIC pointed out that banks’ PDNA ratio is still well below the pre-pandemic average of 1.94%.)
The PDNA ratio for non-owner occupied commercial real estate loans of 2.07% was at its highest level since fourth-quarter 2013, driven by office portfolios at the largest banks, those with greater than $250 billion in assets, the agency said. “However, these banks tend to have lower concentrations of such loans in relation to total assets and capital than smaller institutions, mitigating the overall risk,” the FDIC explained.
Net charge-offs fell one basis point to 0.67% from the prior quarter, according to the FDIC. However, it was 16 bp higher than the year-ago quarter. That’s the second-highest quarterly ratio reported by the industry since second-quarter 2013, the FDIC said.
The credit card net charge-off ratio was 4.48% in the third quarter, down 34 bp quarter over quarter but still 100 bp above the pre-pandemic average.
FDIC-Insured Institutions Reported Net Income of $65.4 Billion in the Third Quarter