American banks had their most profitable quarter ever

American banks are hauling in record-setting profits just as Congress prepares to cut regulations.Bank profits...

Posted: May 22, 2018 4:46 PM
Updated: May 22, 2018 4:46 PM

American banks are hauling in record-setting profits just as Congress prepares to cut regulations.

Bank profits soared by 28% during the first three months of 2018 to $56 billion, according to statistics published by the FDIC on Tuesday.

The blockbuster earnings report, boosted by President Donald Trump's tax cuts and the healthy economy, easily tops the prior record set just three quarters earlier.

The stellar results were released hours before the House of Representatives is expected to pass legislation that would roll back some rules on community banks and regional lenders designed to prevent another financial crisis.

Although bankers have complained of excess regulation, the FDIC report shows that the industry is hardly drowning in regulation. The Dodd-Frank reform law was signed into law in July 2010 by former President Obama. Since then, bank profits have increased by 135% as the American economy climbed out of the Great Recession.

At the urging of regulators, American banks have also built up quite the rainy day fund. The industry is sitting on nearly $2 trillion of capital that can help weather the next storm. Wall Street is betting that deregulation will let banks return some of that cash back to shareholders.

The FDIC said that 70% of the nation's 5,606 banks grew their bottom line during the last quarter. The percentage of money-losing banks dropped to just 3.9%. The FDIC's list of problem banks fell to just 92, the lowest level since the first quarter of 2008. Problem banks are at risk of failure.

Related: Big banks are minting money right now

The financial industry owes a chunk of the mega earnings to Trump's corporate tax cut. The FDIC said the tax law boosted bank profits by about $6.7 billion.

However, banks would have still made a record $49.4 billion without the tax cuts.

"Tax reform has allowed an already strong banking industry to grow even stronger," James Chessen, the chief economist of the American Bankers Association, said in a statement.

Not surprisingly, the vast majority of the industry's earnings come from the mega players on Wall Street, which are not directly helped by the deregulation legislation. Big banks reported gigantic profits during the first quarter, thanks largely to the tax cuts.

Both Morgan Stanley and Bank of America logged record quarterly earnings, while a critical measure of profitability at Goldman Sachs hit a five-year high.

More impressive, JPMorgan Chase, the largest American bank, made $8.7 billion last quarter. That was the largest quarterly profit by any US bank ever.

Lending has been a sore spot for larger banks, despite the strength of the US economy and healthy bank balance sheets. The FDIC said that commercial and industrial loans increased by 1.9% last quarter, while nonfarm nonresidential loans ticked up by 0.8%. Mortgage lending inched just 0.4% higher.

"Loan growth has remained anemic," said Brian Gardner, Washington policy analyst at investment bank KBW. He cited a combination of "weak" demand for loans and regulatory pressure.

"Regulators have been looking over bankers' shoulders with increased vigilance since the crisis," said Gardner.

Related: House clears path to roll back post-crisis banking rules

Community banks, which many say were unfairly snagged by Dodd-Frank, look healthy as well. The FDIC said that the nation's 5,168 community banks grew their bottom lines by 18% during the first quarter to $6.1 billion. The agency noted that community lenders grew loans faster than the overall industry.

Still, FDIC Chairman Martin Gruenberg warned banks not to get reckless just because the US economy is humming along right now.

"With the current expansion in its latter stage," Gruenberg said, "the industry needs to be prepared to manage the inevitable downturn in order to avoid financial system disruption."

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 296154

Reported Deaths: 6764
CountyCasesDeaths
DeSoto19700230
Hinds18851392
Harrison16736281
Rankin12757265
Jackson12623228
Lee9694161
Madison9480203
Jones7990147
Forrest7234138
Lauderdale6837226
Lowndes6032140
Lamar589680
Lafayette5740113
Washington5220130
Bolivar4616124
Oktibbeha441593
Panola431995
Pearl River4178131
Warren4134115
Pontotoc410571
Marshall403592
Monroe3990127
Union396174
Neshoba3817169
Lincoln3552104
Hancock348975
Leflore3380118
Sunflower318986
Tate303174
Pike301296
Scott294570
Alcorn292263
Yazoo290565
Itawamba290175
Coahoma281169
Tippah279265
Copiah278758
Simpson276280
Prentiss270258
Wayne254341
Leake252871
Marion252778
Covington249580
Grenada247878
Adams234678
George232145
Newton230852
Winston221877
Jasper213645
Tishomingo212665
Attala206669
Chickasaw201453
Holmes182370
Clay179251
Stone172429
Tallahatchie171239
Clarke169371
Calhoun158028
Smith153033
Yalobusha145036
Greene127833
Walthall124340
Noxubee122831
Montgomery122639
Perry122135
Lawrence120321
Carroll118625
Amite111734
Webster110832
Jefferson Davis102231
Tunica99323
Claiborne98829
Benton93824
Humphreys92927
Kemper90323
Quitman77414
Franklin76119
Choctaw69817
Jefferson62727
Wilkinson62426
Sharkey49117
Issaquena1676
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Alabama Coronavirus Cases

Cases: 497154

Reported Deaths: 10029
CountyCasesDeaths
Jefferson714001387
Mobile36252736
Madison32573462
Tuscaloosa24289414
Montgomery22708519
Shelby22112215
Baldwin19856285
Lee15021155
Calhoun13755288
Morgan13742252
Etowah13379320
Marshall11439210
Houston10110262
Elmore9451185
Limestone9413136
St. Clair9003225
Cullman8979182
Lauderdale8610212
DeKalb8486175
Talladega7582165
Walker6571259
Jackson6542103
Autauga631391
Blount6229127
Colbert5998120
Coffee5259103
Dale4657107
Russell406433
Franklin399778
Covington3989106
Chilton3891100
Escambia378772
Tallapoosa3613143
Clarke343953
Chambers3423111
Dallas3419142
Pike293372
Marion288895
Lawrence284683
Winston258668
Bibb245960
Geneva240270
Marengo238357
Pickens225055
Barbour212951
Hale211969
Fayette201357
Butler201166
Henry182941
Cherokee177739
Monroe166639
Randolph164640
Washington156635
Macon147243
Crenshaw146254
Clay145554
Cleburne139741
Lamar133733
Lowndes132551
Wilcox122525
Bullock117236
Conecuh107024
Perry105927
Sumter99432
Coosa89624
Greene88532
Choctaw55123
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