Banks enjoyed the best year in recent history in 2018, according to a survey of the industry released Thursday by the Federal Deposit Insurance Corporation.
Annual bank profits rose $72.4 billion to $236.7 billion, the regulatory agency said.
Much of the improvement came in the last quarter of the year, when banks recorded a 133 percent increase in profits from an unusually weak fourth quarter the year before.
Lower taxes and substantially increased loan profits drove much of the growth, as banks benefited from both the 2017 tax reform law and rising interest rates.
However, losses on loans, which were lighter overall in 2018, crept up during the final quarter of the year to their highest level since the final quarter of 2012. But loan losses, as measured against total revenue banks generated, decreased slightly.
Still, FDIC Chairman Jelena McWilliams said the increase in loan losses bore close monitoring, as an uptick could signal the end of a strong business cycle.
“Low interest rates and an increasingly competitive lending environment have led some institutions to reach for yield [through taking more risks], and the recent flattening of the yield curve may present new challenges in lending and funding,” said McWilliams. “Therefore, banks must maintain prudent management of these risks in order to support lending through this economic cycle.”
The corporate tax cut in 2017’s tax law continued to benefit banks. The FDIC estimated that under the old corporate tax code the banking industry would have paid nearly $9 billion more in taxes than it ultimately did.
CORRECTION: A previous version of this article incorrectly stated bank profits rose to $140.2 billion, instead of $236.7 billion. The headline and body text have thus been changed accordingly. The Washington Examiner regrets the error.
