U.S. Bank Profits Plummeted 36.5% in 2020 Due to Pandemic Concerns: FDIC


WASHINGTON (Reuters) – U.S. bank profits fell 36.5% in 2020 from a year earlier as banks set aside huge amounts to guard against potential losses, but the industry has showed signs of strengthening in the fourth quarter as the economy begins to recover from the pandemic, a regulator reported on Tuesday.

The industry posted $ 147.9 billion in profits in 2020, a sharp drop from the record profits of 2019, according to the Federal Deposit Insurance Corporation.

However, bank profits rose 9.1% in the fourth quarter to $ 59.9 billion from a year earlier as companies cut back on the cash they had set aside to hedge against losses. losses.

FDIC President Jelena McWilliams said the new data shows that despite declining profits, banks have proven their resilience amid the pandemic.

“The banking sector maintains strong levels of capital and liquidity, which can mitigate potential future losses,” she said in a prepared statement.

The new data shows the crazy swings the banking industry went through in 2020, as companies scrambled to set aside billions of dollars to guard against the economic toll of the pandemic, to start shedding those losses. during the second half of the year.

The profit growth posted by banks in the fourth quarter is mainly due to lower reserves against potential losses. The FDIC said alleged loss of provisions declined 76.5% at the end of 2020 from the end of 2019 to $ 11.4 billion, the lowest level since 1995.

The regulator noted that an imminent challenge for banks is the persistent low interest rate environment. Banks have seen their interest income decline for five consecutive quarters, and the average net interest margin remained at a record high in the fourth quarter.

Reporting by Pete Schroeder; Editing by Marguerita Choy

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