Banks Are Doing Better


The FDIC released its Quarterly Banking Profile last week, and the report shows continued improvement in bank finances. Key positives and one negative include:

  • 12 consecutive quarters of year-over-year earnings increases.

  • A drop in unprofitable banks compared to a year ago.

  • Lowest net charge-offs since Q1 of 2008.

  • Fewer banks on the FDIC "Problem List" for the fifth consecutive quarter.

  • Net interest margin at a three-year low.

Lower provisions for loan losses contributed to those earnings increases. That's a positive indicator for the economy since it's driven by fewer problem loans, but it's not a sustainable boost. At some point, the drop in provisions will level off and stop adding to earnings.

The report shows bank assets are heavily tilted toward the large banks. There were 7246 FDIC-insured banks and savings institutions at the end of the second quarter, with a touch over $14 trillion in combined assets. The 107 banks with over $10 billion in assets had over $11 trillion of the total. The concentration among the bigger banks also carried through to earnings.

All Insured Institutions

<$100 million in assets

$100 million to $1 billion in assets

$1 billion to $10 billion in assets

>$10 billion in assets

Number of institutions






Total Assets
(in billions)






Net income YTD (in millions)






Source: YTD = year-to-date.

The assets and income are even more concentrated among the megabanks. Assets and earnings for the four banks with over a trillion dollars in assets are shown below. Just these four banks control a little over 40% of all the banking assets and a little under 40% of all banking profits in the U.S. as reported by the FDIC.


(in billions)

Income YTD
(in millions)

JPMorgan Chase (NYS: JPM)



Bank of America (NYS: BAC)



Citigroup (NYS: C)



Wells Fargo (NYS: WFC)






Source: Bank summary information sheets at YTD = year-to-date.

I see two key takeaways from this quarter's FDIC report. First, banks are doing better as loan quality continues to improve. That's good news for the banking industry, the economy, and bank investors. Second, for all the talk about dangers of "too big to fail" banks, four banks controlling about 40% of banking activity shows there hasn't been much done about the "too big" part. I'll leave the debate over the pros and cons of bank size to others.

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Fool contributor Russ Krull owns shares of Wells Fargo and Citigroup. You can follow his stock picks here.The Motley Fool owns shares of Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo. Motley Fool newsletter services have recommended buying shares of Wells Fargo. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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