Bank Profits Rose by 79% in Q1

Bank profits for commercial banks and saving institutions surged from $35.8 billion to $64.2 billion in the first quarter of 2024, which represented an increase of 79.5%.

The Federal Deposit Insurance Corporation (FDIC) reported increases were primarily due to banks no longer bearing the burden of billions in special fees that they were directed to pay to recover costs incurred by bank failures last spring.

In November 2023, the FDIC approved a final rule to implement a “special assessment” to recover the loss of funds following the closures of Silicon Valley Bank and Signature Bank.

The bank regulator applied a "special assessment" fee of 0.125% to uninsured deposits of lenders in excess of $5 billion, based on the amount of uninsured deposits a bank held at the end of 2022.

The increase in quarterly profits was also attributed to higher non-interest income, which derives from fees such as annual charges and late fees, as well as lower provision expenses.

In particular, non-interest income increased by $10.3 billion or 15.2%, and provision expenses declined by $4.3 billion or 17.3% compared to the last quarter.

Community bank net income also reached $6.3 billion in the first quarter, which was an increase of $363.2 billion from the last quarter of 2023.

According to the FDIC, lower realized losses on the sales of securities and lower non-interest and provision expenses offset lower non-interest and net interest income for community banks.

FDIC Chairman Martin Gruenberg said:  “The banking industry continued to show resilience in the first quarter. Net income rebounded, asset quality metrics remained generally favorable, and the industry’s liquidity was stable.”

However, he also warned that the banking industry continues to face significant downside risks from the remaining effects of inflations, volatility in market interest rates and geopolitical uncertainty.

“In addition, deterioration in certain loan portfolios, particularly office properties and credit cards, continues to warrant monitoring,”  he added.