Saturday, December 22, 2012

USA Banks Return on Assets at Post-Crisis High

USA Banks Return on Assets of +1.02% for the nine months ended September 30, 2012 signals continued improvement in profitability and ongoing stability in the banking system. There were 7,181 financial institutions reporting. The prior year, the nine months ended 9-30-11, was +0.92%. The current ROA is the highest since the full-year 2006 (+1.28%).

Return on assets reflects the overall performance, and health, of the banking system and takes into account all of the income statement components, including net interest margins, loan loss provisions, operating expenses, and income taxes. Return on assets also indicates how effectively and efficiently assets are being deployed and if the asset mix is ultimately profitable. An ROA of +1.00% is a banking benchmark.

USA Banks Return on Assets by Year The USA Banks Return on Assets (ROA) was +1.28% for the years ended 2004, 2005, and 2006. The ROA decreased to +0.81% and +0.03% in 2007 and 2008, respectively. The ROA then turned negative to -0.07% in 2009, before rebounding to +0.65% in 2010 and +0.88% in 2011.

USA Banks Return on Assets by Segment For the 3 months ended September 30, 2012, the Annualized ROA by banking segments were:
All institutions +1.06%
Credit card banks +3.19%
International banks +0.99%
Agricultural banks +1.36%
Commercial lenders +0.92%
Mortgage lenders +0.75%
Consumer lenders +1.67%
Other specialized (< $1 billion total assets) +1.42%
All other (< $1 billion total assets) +1.05%
All other (> $1 billion total assets) +1.01%

Quarterly Profits Continue to Improve (FDIC Quarterly Banking Profile, December 4, 2012) Reduced expenses for loan losses and rising noninterest income helped lift insured institutions’ earnings to $37.6 billion in third quarter 2012. This quarterly net income represents a $2.3 billion (6.6 percent) improvement over third quarter 2011, and is the highest quarterly total reported by the industry since third quarter 2006. The average return on assets (ROA) rose to 1.06 percent, from 1.03 percent a year earlier. More than half of all institutions (57.5 percent) reported higher earnings than a year ago, and only 10.5 percent reported negative net income for the quarter. This is the lowest proportion of unprofitable institutions in more than five years (since second quarter 2007).


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