U.S. banks saw net income increase year over year in the fourth quarter, according to the Federal Deposit Insurance Corporation’s (FDIC) Quarterly Banking Profile.
The FDIC, which tracks 4,706 commercial banks and savings institutions that it insures, found that net income hit $68.4 billion in the fourth quarter of 2022, up 7.1 percent from the fourth quarter of 2021 but down 4.6 percent from the third quarter. Growth in net interest income exceeded growth in provision expense, year over year.
Overall, for full year 2022, net income was $263 billion, down 5.8 percent from 2021, mainly due to higher provision for credit loss expenses, offsetting gains in net interest income.
The aggregate return on assets ratio (ROA) was 1.16 percent in the fourth quarter, down from 1.21 percent in the third quarter. For the full year, the ROA dropped to 1.12 percent last year from 1.23 percent in 2021.
In addition, the FDIC report found that the net interest margin (NIM) increased to 3.37 percent, up 23 basis points from a quarter ago and 82 basis points from the fourth quarter of 2021. The year–over–year growth in the NIM was the largest increase in the history of the QBP. It is also higher than the pre-pandemic average of 3.25 percent.
Total loan and lease balances increased 1.9 percent in the quarter, with consumer loans up 3.5 percent, leading the way. Compared to the fourth quarter of 2021, loan balances were up 8.7 percent, driven by 9.7 percent growth in commercial and industrial (C&I) loans, a 9.8 percent increase in residential mortgages, and a 10 percent increase in consumer loans.
Further, loans that were 90 days or more past due or on nonaccrual status increased to 0.73 percent, up one basis point from the prior quarter. Noncurrent credit card and C&I loans drove the increase in the noncurrent rate.
In addition, total net charge–offs as a ratio of total loans increased 10 basis points from the prior quarter and 15 basis points from a year prior to 0.36 percent. This was driven by credit card, C&I, and auto loan losses. However, the total net charge off rate remains below the pre–pandemic average of 0.48 percent.
Finally, 36 institutions merged, three new banks opened, and no banks failed in the fourth quarter of 2022.