WASHINGTON — Higher fee income, a modest bounce- back in margins and lower credit costs helped banks overcome rising expenses and other obstacles, according to a closer look at bank's third-quarter results issued Tuesday by the Federal Deposit Insurance Corp.
U.S. banks brought in $69.5 billion in net income in the third quarter, slightly down from the
Noninterest income rose 4.7% from the year-earlier period to $76 billion. Growth in interchange fee income and investment banking income were major contributors. More than 57% of all financial institutions reported higher noninterest income.
Diane Ellis, director of research and insurance at the FDIC, said that interchange fees were supported by growth in credit card lending. As to whether that trend continues, Ellis said, "A lot depends on the health and outlook of the consumer."
Meanwhile, net interest income improved 4.4% year over year to $134.4 billion. Lower interest expenses were a factor, as were moderating margins. Net interest margins were 2.56% — an improvement after the back-to-back historic lows recorded in the first and second quarters of 2021 yet still off the pace of a year earlier.
On the credit cost side, banks reported a reserve release of $5.2 billion, a $19.7 billion swing from provisions for loan losses of $14.5 billion in the third quarter of 2020.
Loan growth remained sluggish: Total loan and lease balances increased by 0.6% between the second and third quarter, a $62.7 billion bump that was led by one- to four-family mortgages, consumer lending and commercial real estate lending. On a year-over-year basis, total loans and leases rose $10 billion, or 0.1%
Banks' noninterest expenses continue to increase, though the costs still make up a historically low percentage of institutions’ overall assets. Led by “higher marketing and data processing expenses,” noninterest expenses rose 3.6% from a year earlier to $128 billion, while those expenses as a percentage of assets remained at 2.23% — the same as in the second quarter of 2021 and 11 basis points lower than in the third quarter of 2020.
Banks also saw notable deposit growth in the third quarter of 2021, reversing a slowdown that began in the second quarter after
And while no banks failed, the number of FDIC-insured institutions dropped to 4,914 in the third quarter from 4,951 three months earlier. The FDIC also reported a significant drop of 10 banks from the agency’s “Problem Bank List” since the second quarter, bringing the total to 46 and marking “lowest level since QBP data collection began in 1984,” according to Tuesday’s report.
