- Banks’ lending profits fell the most since at least 1986 in the third quarter as the coronavirus slammed profit margins, the Federal Deposit Insurance Corporation said Tuesday.
- Net interest income fell by 7.2%, or $10 billion, to $129 billion from the year-ago period, according to the agency’s report.
- Net interest margins fell to a record-low 2.68% over the three-month period. That’s 0.68 points lower than in the third quarter of 2019.
- The drop in lending income did little to dent overall profitability. Slashed loan-loss provisions helped net profits jump $32.4 billion to $51.2 billion in the third quarter, the FDIC said.
- Visit the Business Insider homepage for more stories.
Net interest income — profits made through banks’ lending arms — fell the most on record through the third quarter as the coronavirus dragged on margins, the Federal Deposit Insurance Corporation said in a Tuesday report.
Lending profits fell by 7.2%, or $10 billion, to $129 billion from the year-ago quarter, marking the fourth straight quarter of declines. Nearly half of all banks reported lower net interest income year-over-year, according to the FDIC.
Earnings were pressured by the lowest net interest margins in the agency’s 34-year history. The average net interest margin fell 0.68 points from the year-ago period to 2.68%.
Read more: Shelby Osborne achieved financial freedom using a unique twist on a classic real-estate investment strategy. Here’s how she built a portfolio of 53 units, starting in her early 20s.
The decline in lending income was still overshadowed by gains elsewhere. Banks’ net profits climbed $32.4 billion to $51.2 billion in the third quarter, the FDIC said. The sum is still down $6.2 billion from the year-ago period but shows the industry bouncing back significantly from virus-induced lows. Earnings were largely boosted by a $47.5 billion decline in loan-loss provisions.
Video: S&P Global CEO says recurring revenue to make up bulk of rating agency’s business (CNBC)
“Lower provisions reflect the improving economy and a general expectation from the banking industry of stabilization in the expected future credit performance of the loan portfolio,” FDIC Chairman Jelena McWilliams said in a statement.
More than half of all banks reported higher income compared to the second quarter. Still, the share of unprofitable firms rose year-over-year to 4.7%.
The third quarter saw one new bank open and 33 banks absorbed through mergers. No banks failed through the period, the FDIC said.
Now read more markets coverage from Markets Insider and Business Insider:
BlackBerry spikes record 65% after finalizing deal with Amazon for automotive data software
Zoom slides 14% as slowing sales-growth forecasts make investors question the stock’s 200% post-COVID rally
HSBC says buy these 31 global stocks that are exposed to the pandemic’s biggest tech disruptions and set to become growth engines of the future