Banks insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $43.7 billion in the fourth quarter of 2016, up $3.1 billion (7.7 percent) from a year earlier, says FDIC’s Quarterly Banking Profile.
The earnings increase was primarily due to an $8.4 billion (7.6 percent) increase in net interest income, the report said.
Of the 5,913 insured institutions surveyed, 59 percent reported year-over-year growth in quarterly earnings. Only 8.1 percent of banks were unprofitable in Q4, down from 9.6 percent a year earlier.
“Revenue and net income were higher, loan balances grew, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall,” FDIC Chairman Martin Gruenberg said. “Community banks also reported solid results for the quarter and year with strong net income, revenue, and loan growth.”
However, Gruenberg said the operating environment for banks remains challenging.
“Low interest rates for an extended period have led some institutions to reach for yield, which has increased their exposure to interest-rate risk, liquidity risk, and credit risk. Banks must manage risks prudently to ensure that industry growth is on a long-run, sustainable path,” Gruenberg added.
The report also found that full-year earnings for the banking industry rose to $171.3 billion in 2016, up $8 billion (4.9 percent) from 2015.
Community banks reported a $508 million (10.5 percent) increase in net income in the fourth quarter.
Also, the FDIC’s “Problem Bank List” fell to 123 from 132 – the lowest number in seven years. It is down from a high of 888 in the first quarter of 2011.