All Banking Law, All in One Place. Bloomberg Law: Banking is the comprehensive research solution that powers your practice with access to integrated banking-related legal news, analysis,...
By Jeff Bater
Bank profits grew nearly 5 percent in 2016, according to a report giving an upbeat appraisal of an industry President Donald Trump is focusing on as part of a larger deregulatory agenda.
Banks and thrifts insured by the Federal Deposit Insurance Corporation (FDIC) reported $171.3 billion in net income for the year, which was $7.9 billion more than lenders earned in 2015, the agency said in its quarterly profile of the industry.
“Fourth quarter and full-year 2016 results were largely positive for the banking industry,” FDIC Chairman Martin Gruenberg said at a press briefing on the report Feb. 28. “Revenue and net income were higher, loan balances grew, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall.”
Still, not all is rosy for the industry. Gruenberg said low interest rates over the years have led some institutions to reach for yield, which has increased their exposure to interest-rate risk, liquidity risk and credit risk.
”The industry continues to face challenges,” he said. “Margin pressures have led some institutions to ‘reach for yield’ through higher-risk assets and extended asset maturities. Banks must manage their interest-rate risk, liquidity risk, and credit risk carefully for industry growth to remain on a long-run, sustainable path. These challenges will continue to be a focus of supervisory attention.”
The continuing recovery by banks from the crisis unfolds as Republicans consider regulatory relief for the industry. The Trump administration and GOP lawmakers blame the Dodd-Frank Act and government regulations for stifling economic growth.
During a meeting in January with small-business owners, Trump promised to do “a big number” on Dodd-Frank. He said the law had damaged the country’s entrepreneurial spirit and limited access to needed credit, calling it a “disaster.”
The FDIC data supported a recent statement by Federal Reserve Chairman Janet Yellen that the industry is doing well. Yellen, in an appearance before the Senate Banking Committee on Feb. 14, said U.S. banks are generally considered quite strong relative to their international counterparts. She characterized lenders as “very well capitalized,” gaining market share and “quite profitable.”
The FDIC report Feb. 28 said banks and thrifts reported net income of $43.7 billion in the fourth quarter of 2016, up $3.1 billion, or 7.7 percent, from the same period a year earlier. Total loan and lease balances increased $72.3 billion, or 0.8 percent, during the quarter, with increases in credit card balances, real estate loans secured by nonfarm nonresidential real estate properties, and real estate construction and development loans.
Lenders classified as community banks did particularly well in the last three months of 2016, reporting a 10.5-percent increase in net income, the FDIC data showed.
Small banks have been pushing Congress for years to lighten the burden that’s amassed from too many rules. The good health of banks evidenced by the FDIC report isn’t likely to silence calls for policy relief.
“Regulatory pressures and greater capital requirements were challenges that helped drive 251 banks to merge in 2016,” James Chessen, chief economist of the American Bankers Association, said in a statement on the report. “While the industry’s solid performance as a whole demonstrates a very resilient banking system, the underlying regulatory pressures driving community banks to sell or merge can’t be ignored. A tailored system of regulation would go a long way toward allowing banks of every size to be successful in their communities.”
To contact the reporter on this story: Jeff Bater in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)