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1998 FDIC Q. Banking Profile 1 (1998)

handle is hein.journals/fdicqubkp1998 and id is 1 raw text is: First Quarter 1998 .. n e. FDIC Donna Tanoue, Chairman anking Profile COMMERCIAL BANKING PERFORMANCE - FIRST QUARTER 1998 * Industry Registers Fifth Consecutive Quarterly Earnings Record * Net Income of $15.9 Billion Exceeds Previous Record by $621 Million * Noninterest Income, One-Time Gains Lift Industry Profits * Net Interest Margins Decline for Fifth Time in Last Six Quarters For the fifth consecutive quarter, insured com- mercial banks reported a new earnings record. Bank profits in the first quarter totaled $15.9 bil- lion, an increase of $621 million (4.1 percent) over the previous record, set in the fourth quar- ter of 1997, and a $1.5-billion (10.1 percent) im- provement over year-earlier results. The industry's return on average assets (ROA) rose to 1.26 percent, compared to 1.24 percent in the fourth quarter of 1997 and 1.25 percent in the first quarter of 1997. More than two out of every three banks (67.0 percent) reported an ROAof 1 percent or higher in the first quarter, and almost as many (63.6 percent) reported higher earn- ings than a year ago. The earnings strength can be traced to several familiar sources: continued strong asset expansion, a growing contribution from noninterest revenue sources, and mostly favorable asset quality. In addition, the indus- try's net income received a boost of more than Quarterly Net Income, 1994-1998 $ Billions 15 10 5 0 1 2 3 4 1 2 3 4 1994 1995 $1 billion from nonrecurring gains. As has been the case in recent quarters, the improvement in earnings was limited by declining net interest margins, rising credit-loss provisions and higher noninterest expenses related to mergers and holding company restructurings. Noninterest Income Provides a Growing Proportion of Bank Income, 1984-1998 Quarterly Noninterest Income, % of Net Operating Revenue* 40 35 30 25 20 1984 1986 1988 1990 1992 1994 1996 1998 *Net operating revenue equals net interest income plus noninterest income. 15. 14.5 14.614.7 income of $29.2 billion was $4.6 3.8 13.7: lion (18.8 percent) higherthanayear ago. Reve- 132 nues from trust activities and other fee income registered especially strong growth. Net interest income was $2.2 billion (5.2 percent) higher, al- though the average net interest margin was 16 basis points lower (4.06 percent versus 4.22 percent). The improvement in net interest in- come was the result of a 9.9-percent increase in interest-earning assets in the twelve-month pe- riod ending March 31, 1998. Sales of securities 2 3 4 1 2 3 4 1 contributed $382 million (92.5 percent) more to 1996 1997 1998 banks' pre-tax revenues than a year earlier, Requests for copies of and subscriptions to the FDIC Quarterly Banking Profile should be made through the FDIC's Public Information Center, 801 17th Street, NW, Washington, DC 20434; telephone (202) 416-6940 or (800) 276-6003. Also available on the Internet at www.fdic.gov. Comparable financial data for individual institutions can now be obtained from the PDIC's Institution Directory (I.D.) System on this Web site. * Securities and Other Gains, Net [7 Net Operating income 138 I 118 I20 201 2 1111 0.7-1 I iiri 111111 1111111111 I iii 11,1Iii ii ~I 39.7i FDIC Division of Research & Statistics Don Inscos Associate Director, Statistics Branch (202) 898-3940 Tim Critchfield (202) 898-8557 Jim McFadyen (202) 898-7027 Ross Waldrop (202) 898-3951 1 .0 11

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