Both figures surpass the industry’s previous record for quarterly profits, the $48.1 billion the industry posted during the second quarter of 2017.
The data “shows the banking industry is exceptionally healthy and poised to continue driving a strong U.S. economy in the months ahead,” James Chessen, chief economist for the American Bankers Association, said in a statement.
On nearly every measure tracked by the FDIC, the industry appears to be thriving: Fewer borrowers are late on their loans, and the FDIC’s “problem bank list” now just includes 92 institutions, the lowest number since 2008 — during the height of the financial crisis, according to the report.
But FDIC Chairman Martin J. Gruenberg warned in a statement that some banks have responded to the more competitive environment by taking on more risks. “While the performance of the banking industry has been positive, the current economic expansion is now the second longest on record,” Gruenberg said. “It is important to remain vigilant to underlying risks in the latter stage of this economic cycle.”
The industry’s jump in profits is due in part to last year’s corporate tax cut and to rising interest rates, both of which have made it easier for banks to make a profit. The Trump administration has also taken several steps to ease the industry’s regulatory burdens, which has also bolstered their bottom lines, industry analysts say.
The House on Tuesday is expected to vote through a broad relaxation of regulations put in place after the global financial crisis. The bill, which has already passed the Senate with bipartisan support, would subject fewer financial institutions to regulators’ toughest rules.
The White House supports the bill, and Trump plans to sign it.
Proponents of the bill say it keeps critical safeguards in place while protecting smaller banks from needless regulations. Critics say it’s a giveaway to banks that puts the economy at a greater risk of collapse.
The industry’s more than 5,000 community banks, which supporters of the bill have said would benefit most from the regulatory relief, saw profits rise 17.7 percent to $6.1 billion during the first quarter, according to the FDIC data. Without the corporate tax cut, the community bank’s quarterly profits would have risen 9.2 percent to $5.6 billion.
“When lawmakers vote for banking deregulation even though banks are raking in record profits, it exposes what is really at work,” said Lisa Donner, executive director of Americans for Financial Reform. “The bank lobby has flooded the political system with money, and is getting a return on its investment. The result is legislation that makes the financial system less safe and less fair, and puts consumers at greater risk of abuse.”
On Monday, President Trump signed legislation rescinding a five-year-old Obama-era policy warning auto lenders against allowing minority borrowers to be charged more than their white peers.
Later this week, the Senate is expected to approve Trump’s nominee, Jelena McWilliams, a bank lawyer, to become FDIC chair. McWilliams’s takeover of the leadership of the FDIC, an important banking regulator, would clear the way for more regulatory relief, industry analysts have said. “We expect bank regulatory relief actions and proposals to pick up in pace with the confirmation of McWilliams,” Ed Mills, Washington-based analyst at Raymond James, said in a research note.