The Federal Deposit Insurance Corp. released its Quarterly Banking Profile for the first quarter of 2017 last week without fanfare. Investors in bank stocks need to be aware of key warning signs.
While the FDIC touts continued positive financials, they are also concerned about developing warning signs. This is extremely important as the quarterly banking profile is the balance sheet for the U.S. economy.
FDIC Chairman Martin J. Gruenberg commented that the first quarter was "largely positive" as quarterly revenue and net income were strong year over year. At issue is slowing loan growth during the past two quarters.
The FDIC Chair continues to be concerned that the banking system faces the challenges of a difficult interest-rate environment and competitive lending environment. Net interest margins have been difficult to manage as some banks "reach for yield" buying higher-risk assets with extended maturities. Interest-rate risk, liquidity risk and credit risk needs to be monitored and should remain a focus of supervisory attention.
First-quarter FDIC data shows a slight rise in Quarterly Net Income to $44 billion, up from $43.7 billion in the fourth quarter, and up from $39 billion in the first quarter of 2016. Community banks had a net income of $5.6 billion, up 10.4% year over year.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.