U.S. banks generated net income of $64.2 billion in the first quarter of 2024, up $28.4 billion 79.5 percent from the prior quarter, according to the Federal Deposit Insurance Corporation’s latest Quarterly Banking Profile.
The reason for the massive increase is related to several factors, including higher noninterest income, lower provision expenses, and a large decline in noninterest expense due to several substantial, non-recurring items recognized by large banks in the prior quarter.
“The banking industry continued to show resilience in the first quarter. Net income rebounded from the non-recurring expenses that affected earnings last quarter, asset quality metrics remained generally favorable, and the industry’s liquidity was stable. However, the industry’s net interest margin declined as competition continued to pressure rates paid on deposits and asset yields declined,” FDIC Chair Martin Gruenberg said.
Specifically, noninterest expense was down 13.3 percent, with more than half of the decline coming from a drop related to a special assessment assessed top large banks in the previous quarter stemming from the 2023 banking crisis. Also, provision expenses were down 17.3 percent, while noninterest income was up 15.2 percent.
Also, the banking industry reported an aggregate return-on-assets ratio (ROA) of 1.08 percent in the first quarter 2024, up from 0.61 percent in fourth quarter 2023 but down from 1.36 percent in first quarter 2023.
While net income for the 4,128 community banks insured by the FDIC jumped 6.1 percent to $6.3 billion in the first quarter, most of the gains came from large banks.
In addition, the FDIC report said that the industry’s net interest margin (NIM) declined ten basis points to 3.17 percent in the first quarter. NIM declined as funding costs continued to increase while the yield on earning assets declined during the quarter.
The industry’s first-quarter NIM – which is the difference between interest coming in on loans and going out on deposits — was seven basis points below the pre-pandemic average NIM.
Further, loans that were 90 days or more past due increased to 0.91 percent 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.
Among other findings, the report said that total loan and lease balances declined 0.3 percent from the previous quarter due to 3.2 percent lower credit card loans and 1.4 percent lower auto loans. But compared to the same quarter a year ago, loan and lease balances were up 1.7 percent.
Also, deposits increased for the second consecutive quarter, rising 1.1 percent from the fourth quarter of 2023.
Finally, the Deposit Insurance Fund (DIF) balance increased by $3.5 billion to $125.3 billion, while the reserve ratio increased two basis points to 1.17 percent.