St Casimirs Mortgage Minute

Banks Earnings Slip in First Quarter as Housing Market Cools


FDIC-insured banks and savings institutions earned $37.2 billion in the first quarter, 7.6 percent lower than the industry’s earnings a year ago, the FDIC said yesterday. The fall in earnings was driven principally by a 10.7 percent decrease in noninterest income -- particularly lower mortgage activity and less trading revenue, the agency said.

The average return on assets dipped to 1.01 percent from 1.12 percent a year earlier. Net operating revenue fell 4 percent, or $6.7 billion, with the drop in noninterest income only mildly offset by a 0.3 percent increase in interest income. The decline in noninterest income reflected a continued cooling in the housing market, with income from mortgage sales, securitizations and servicing down 53.6 percent year-on-year.

Asset quality continued to improve as troubled loans and leases fell, however. Charge-offs were $10.4 billion in the first quarter, down 34.8 percent from a year earlier. The number of institutions on the problem bank list dropped for the 12th straight quarter from 467 to 411, and the Deposit Insurance Fund balance rose from $47.2 billion to $48.9 billion during the quarter.

“Banks are working hard to meet their customers’ needs despite challenges arising from persistently low interest rates, rising compliance costs and declining revenue from trading activities,” said ABA Chief Economist James Chessen. “The harsh winter weather put a chill on loan demand in the first quarter, particularly for mortgage loans. Springtime has brought renewed confidence for businesses and consumers, which should help to boost both credit demand and bank revenue.”

--James Chessen, ABA Daily Newsbytes
http://www.aba.com/Press/Pages/052814QuarterlyBankEarningsReport.aspx