- Banks posted 35.9% growth in profit during the third quarter of 2021, compared with the same period a year ago, the Federal Deposit Insurance Corp. (FDIC) reported Tuesday.
- During the three months ending on Sept. 30, the 4,914 FDIC-insured institutions reported a combined profit of $69.5 billion, up $18.4 billion year over year.
- However, the lenders’ net income fell 1.2%, or $875.5 million, since Q2 2021, as banks slowed the release of credit loss provisions and continued to contend with a federal funds rate near zero.
For the third straight quarter, banks continued to diminish loan loss provisions, albeit at a slowed pace. During the three months ending on Sept. 30, lenders reported a net reserve release of $5.2 billion, compared with $10.8 billion in the second quarter.
In sharp contrast, during the same period last year, banks provisioned $14.4 billion for credit losses, steeling themselves for pandemic-driven defaults that never materialized.
According to the report, 95.9% of FDIC-insured institutions were profitable.
Investment banking fee income was up 70% year over year, and noninterest income climbed 4.7% in the same time frame, driven largely by higher interchange fees. Nearly 57.7% of institutions reported higher noninterest income compared with the same quarter last year.
Net interest margins were up 2.56% since last quarter, and net interest income rose 4.4% from last quarter.
On the costs side, total loans and leases were up 0.6% from last quarter and 0.1% since last year. Noninterest expense also rose $4.4 billion, or 3.5% year over year. The increase was driven by salary and benefit expenses, along with higher marketing and data processing expenses. As in this year's second quarter, noninterest expenses continued to comprise a record-low percentage of average assets.
In Q3 2021, deposit growth increased 2.3%, or $436 billion, compared with the previous quarter, and more than two-thirds of banks reported deposit growth during that period. Deposits have cooled down significantly since booming in 2020.
At the beginning of the COVID-19 pandemic, bank deposits surged to unprecedented levels. Deposits jumped by $865 billion in April 2020 alone, CNBC reported — an increase that trumped the earlier record for an entire year.
The number of FDIC-insured institutions dwindled from 4,951 in Q2 to 4,914 in Q3. During the quarter that ended on Sept. 30, three new banks opened, 39 institutions merged with other FDIC-insured institutions, one bank ceased operations and no banks failed.
The number of institutions on the FDIC’s “Problem Bank List” declined by five during the latest quarter to 46 — the lowest figure since data collection began in 1984.