ViewPoint: National Banking Trends

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National Banking Trends

U.S. commercial banks across the nation continued their uneven progress toward better profitability in the fourth quarter. Aggregate return on average assets (ROAA) turned down slightly from the prior quarter of 2011 (see chart 1).

The decline was evident across all sizes of institutions. ROAAs are typically lower in the fourth quarter as banks determine what expenses need to be recognized prior to moving into a new year. Net interest margin improved slightly in the fourth quarter. One of the concerns going into the fourth quarter was centered on noninterest income as a result of caps on interchange fees. For banks under $10 billion, noninterest income actually increased over the prior quarter while it declined for larger banks. Banks under $10 billion were exempted from the interchange fee cap. The story with earnings continues to be more a function of cost control than an improvement in net interest margin.

Loan growth is improving, but only at banks with an asset size greater than $10 billion (see chart 2). Annualized loan growth for all commercial banks was 7.8 percent, but larger banks had annualized growth of 10.4 percent in the fourth quarter, and smaller banks had negative loan growth.