Q2 net income for 4,539 FDIC-insured commercial banks and savings institutions rose 11% Q/Q to $71.5B, helped by lower noninterest expenses, higher noninterest income, and gains on sales of securities, the Federal Deposit Insurance Corp. said on Thursday.
Much of the quarterly increase in net income was driven by nonrecurring items, including an estimated $4B reduction in reported expense related to the FDIC special assessment, ~$10B in one-time gains on equity security transactions, and the sale of an institution’s insurance division that resulted in an after-tax $4.9B gain. Those items were partly offset by several large banks selling bond portfolios at a loss and the industry’s $2.7B increase in provision expense.
The overall industry’s net interest margin declined 1 basis point to 3.16% in Q2 as the growth in funding costs slightly exceeded growth in earning asset yields. The industry’s Q2 NIM was 9 bps below the prepandemic average.
Net operating revenue (net interest income plus noninterest income) rose 0.5% from Q1 to $250.7B. Net interest income edged up 0.1% to $171.7B and noninterest income grew 1.5% to $79.0B.
Noninterest expenses declined 2.4% from Q1 due to the reduction of nonrecurring expenses incurred by large banks in Q1.
Provisions for credit losses totaled $23.3B, up % from the prior quarter. They increased the most at banks with more than $250B in assets, rising 30% Q/Q. “The increase in provision expense reflected loan growth, deterioration in office markets, and high credit card charge-offs,” the FDIC said.
The industry’s net charge-off rate rose 3 bps from the prior quarter to 0.68%, the highest quarterly rate since Q2 2013 and was 20 bps higher than the year-ago quarter.
Credit card net charge-off rate was 4.82%, up 13 bps Q/Q and the highest rate reported since Q3 2011.
Total loan and lease balances rose 1.0% from the previous quarter to $12.5T.
Domestic deposits fell 1.1% to $17.3T, well below the prepandemic average Q2 growth of 0.2%.
The number of banks on the FDIC’s “Problem Bank List” increased to 66 from 63 and total assets held by those banks rose by $1.3B to $83.4B. Problem banks represent 1.5% of total banks, which is within the normal range of 1%-2% of all banks during non-crisis periods.
The Deposit Insurance Fund balance rose $3.9B to $129.2B, the FDIC said. The reserve ratio increased by 4 bps to 1.21%.
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