Trouble in the oil and gas industries spelled out loan losses and a dip in net income for the nation’s 6,122 FDIC-insured banks in the first quarter this year, the agency said yesterday.
Aggregate net income declined 1.9 percent, or $765 million, year-over-year to $39.1 billion. The FDIC attributed that decline mainly to a $4.2 billion increase in provisions for loan losses and a $2.2 billion decline in noninterest income. The former, the agency said, was due to rising levels of troubled C&I loans, especially in the energy sector. The latter was due to weak trading income at a few large banks and lower income from asset servicing.
The FDIC also noted some favorable metrics in its latest quarterly banking profile. Sixty-one percent of banks posted year-over-year growth in quarterly earnings, and the proportion of unprofitable institutions fell to 5 percent from 5.7 percent a year ago, representing the lowest level of unprofitable banks since the first quarter of 1998.
Community banks fared better than the industry more generally. The 5,664 FDIC-identified community banks posted $5.2 billion in net income in Q1, representing a year-over-year increase of 7.4 percent. Net operating revenue increased 6.9 percent, or $1.4 billion, to $22.2 billion, compared with the 2.7 percent boost that the overall industry saw.
Total loan and lease balances increased $99.7 billion, or 1.1 percent, during the first quarter. For the 12 months ended March 31, loans and leases increased $577.1 billion, or 6.9 percent, representing the largest 12-month growth rate since mid-2007 to mid-2008.
FDIC-insured banks also increased their loan-loss provisions 49.7 percent year-over-year to $12.5 billion. A little more than one-third of all banks, 35.6 percent, posted year-over-year increases in loan-loss provisions.
Noncurrent loans and leases – that is, those 90 days or more past due or in nonaccrual status – increased 2.4 percent, or $3.3 billion, during the first quarter. Noncurrent loans to C&I borrowers increased 65.1 percent, or $9.3 billion, driven by weakness in the energy sector. Net charge-offs to C&I borrowers increased 144.7 percent year-over-year to $1.1 billion. Total net charge-offs of all types of loans increased 12.3 percent to $1.1 billion.
