Thursday, March 14, 2013

USA Banks Return on Assets Highest Since 2006

USA Banks Return on Assets of +1.00% for 2012 signals continued improvement in profitability and ongoing stability in the banking system. There were 7,083 financial institutions reporting. The prior year 2011 was +0.88%. The current ROA is the highest since 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%, +0.88%, and now +1.00% in 2010, 2011, and 2012, respectively.

USA Banks Return on Assets by Segment For 2012, the ROA by banking segments was:
All institutions +1.00%
Credit card banks +3.14%
International banks +0.80%
Agricultural banks +1.27%
Commercial lenders +0.89%
Mortgage lenders +0.87%
Consumer lenders +1.47%
Other specialized (< $1 billion total assets) +1.24%
All other (< $1 billion total assets) +0.87%
All other (> $1 billion total assets) +1.00%

Full-Year Earnings Are Second Highest Ever (FDIC Quarterly Banking Profile, February 26, 2013) Full-year net income totaled $141.3 billion, a $22.9 billion (19.3 percent) improvement over 2011. This is the second-highest annual earnings ever reported by the industry, after the $145.2 billion total in 2006, when the industry had $2.7 trillion less in assets. The average ROA rose to 1.00 percent from 0.88 percent in 2011. The largest contribution to the increase in earnings came from reduced provisions for loan losses, which fell by $19.3 billion (24.9 percent). Noninterest income was $18.4 billion (8 percent) higher than in 2011, thanks to an $11.2 billion (174.4 percent) increase in gains on loan sales, a $6.8 billion (93.9 percent) increase in servicing income, and a $2.4 billion (51.8 percent) reduction in losses on foreclosed property sales. The improvement in noninterest income was limited by a $12.4 billion negative swing in results from trading credit exposures. Net interest income was $1.3 billion (0.3 percent) lower than in 2011, as the full-year NIM fell from 3.60 percent to 3.42 percent. Realized gains on securities and other assets added $4.2 billion (75.7 percent) more to pretax earnings than a year earlier.


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