U.S. banks had $37.2 billion in first-quarter net income as mortgage and trading revenue fell, the Federal Deposit Insurance Corp. said in its quarterly report on industry earnings.
An earnings slump at JPMorgan Chase & Co. and losses at Bank of America Corp. contributed to the decline from a record-setting 2013 that averaged $38.6 billion per quarter. Most big banks saw declines in trading income in the three-month period that ended March 31, while revenue from originating, selling and servicing mortgages fell $4 billion from a year earlier, the FDIC said in the report released in Washington on Wednesday.
“Industry revenue has been affected by narrow margins, modest loan growth and a decline in non-interest income as higher interest rates have reduced mortgage-related activity and trading income fell,” FDIC Chairman Martin Gruenberg said in a statement. On the positive side, he said, loan balances are trending up and more firms are profitable.
The FDIC’s quarterly reports have reflected a slow recovery for banks since the 2008 credit crisis, and the industry’s record profits have relied on cuts to reserves set aside for bad loans. Lenders again bolstered their bottom lines by reducing reserves - a practice that has been criticized by regulators including Gruenberg. Reserves are at a six-year low, the FDIC said.
The number of problem institutions - those viewed by regulators as being at heightened risk of failure - continued to drop, to 411 from 467 in the preceding quarter. Five banks failed in the first quarter, according to the report.