Zero Hedge
August 23, 2018
The happy days on Wall Street have never been happier.
According to the latest quarterly FDIC report released on Thursday, banks reported aggregate net income of $60.2 billion in the second quarter of 2018, up $12.1 billion (25.1%) from a year ago and a new quarterly record. Only 3.8% of institutions were unprofitable during the quarter, down from 4.3% in second quarter 2017. The average return on assets was 1.37%, up from 1.13% a year earlier, most of it again thank to Trump’s tax law.
The improvement in earnings was mostly attributable to higher net interest income and a lower effective tax rate, which contributed more than $6 billion to the bottom line. Assuming the effective tax rate before the new tax law, net income would have totaled an estimated $53.8 billion, an increase of $5.6 billion (11.7%) from Q2 2017.
The FDIC reported that bank net interest income totaled $134.1 billion, an increase of $10.7 billion (8.7 percent) from 12 months earlier and the largest annual dollar increase ever reported by the industry. Specifically, more than four out of five banks (85.1%) reported year-over-year increases.
Meanwhile, net interest margin (NIM) rose fractionally to 3.38%, up 16 bps from a year earlier, as average asset yields grew more rapidly than average funding costs, although it wasn’t clear if these numbers are actuals or pro forma.
One potential caution: institutions with assets of $10 billion to $250 billion reported the largest annual increase in average funding costs (up 30 basis points), as a result of the Fed’s rising interest rates. Still, the improvement in NIM was widespread, as more than two out of three banks (70.2 percent) reported increases from a year earlier.
- A d v e r t i s e m e n t
Noninterest income also increased but at a more modest pace, rising to $68.1 billion, an increase of $1.3 billion (2%) from the previous year. The…