Bank Profits Shattered Records in 2018

Banks made more profits in 2018 than ever before in recorded history. According to recently released data from the Federal Deposit Insurance Corporation (FDIC), banks made more than $236.7 billion in 2018, which is 44.1 percent more than in 2017.

FDIC Chair Jelena McWilliams touted the increased profits as a direct result of the large tax cut passed in 2017. “The banking industry reported a strong quarter. Net income improved on higher net operating revenue and a lower effective tax rate,” said McWilliams. “Loan balances continued to increase, net interest margins improved, and the number of ‘problem banks’ remains low.”

Banks saw an increase in both interest and noninterest income. Net interest income grew 8.1 percent in 2018 from the year before, partly as a result of higher interest rates by the Federal Reserve, while noninterest income grew 2.6 percent.

The higher profits were not only seen by big banks, but also by smaller, community banks. These entities, which encompass most Native-owned banks, reported a net profit of $26 billion, an increase of 29.4 percent from 2017.

The FDIC also reported that loan balances increased 4.4 percent over the past year, mostly due to a substantial increase in loan growth in the 4th quarter of last year. Community banks also saw loans grow by 6.5 percent over the past year, led by “growth in commercial real estate loans, residential mortgages, and commercial and industrial loans.”

Industry associations touted the increased profits. James Chessen, chief economist at the American Bankers Association said, “With tax reform helping to spur business expansion, banks stepped up to meet increased loan demand from businesses of all sizes. Depositors benefited from increased competition for funds as banks looked to attract more deposits to supply loan demand.”