June 11, 2012
FDIC-insured institutions reported USD 35.3 bn in earnings for Q1 2012; an improvement of 22.9% yoy and the highest quarterly net income reported by the industry since Q2 2007. 67.5% of institutions reported yoy earnings improvements, and only 10.3% were unprofitable – the lowest level since Q2 2007. LLPs fell for a tenth consecutive quarter, declining by USD 6.6 bn or 31.6% yoy. Provisions set aside (USD 14.3 bn) were the smallest quarterly total since Q2 2007.
At first sight, the US banking system seems to have turned the corner decisively, not least because the improvement in operating income is no longer mainly driven by lower LLPs. Noninterest income increased by 8% yoy; gains on loan sales were 132.4% higher; income resulting from changes in fair values of financial instruments was 38.2% higher; income from fiduciary activities was up by 6.2%; and service charges on deposit accounts were 2.4% above the level of a year ago. Still, it needs to be recalled that the environment is not yet normal. Extremely low official interest rates may help to improve the credit environment: i) loan losses declined from year-ago levels for a seventh consecutive quarter; ii) NCOs totalled USD 21.8 bn, i.e. down 34.8% yoy; iii) charge-offs were lower in all major loan categories; and iv) the amount of noncurrent loans and leases fell for the eighth quarter in a row. But they take a toll: net interest income, still the most important source of income, was only 0.4% higher.
© Copyright 2013. Deutsche Bank AG, DB Research, D-60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite “Deutsche Bank Research”.
The above information does not constitute the provision of investment, legal or tax advice. Any views expressed reflect the current views of the author, which do not necessarily correspond to the opinions of Deutsche Bank AG or its affiliates. Opinions expressed may change without notice. Opinions expressed may differ from views set out in other documents, including research, published by Deutsche Bank. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made.
In Germany this information is approved and/or communicated by Deutsche Bank AG Frankfurt, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht. In the United Kingdom this information is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange regulated by the Financial Services Authority for the conduct of investment business in the UK. This information is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. and in Singapore by Deutsche Bank AG, Singapore Branch. In Japan this information is approved and/or distributed by Deutsche Securities Limited, Tokyo Branch. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product.