JPMorgan Chase chief executive Jamie Dimon leads one of the most profitable banks on Wall Street. (Mark Wilson/Getty Images)

NEW YORK — Wall Street has never been more profitable and that could be a big problem.

The banking industry has cheered President Trump’s promise to roll back regulations put in place after the financial crisis to rein in Wall Street. But the industry’s record-setting profits complicate the arguments for rolling back those rules, which banking analysts have said could boost their profits even more.

The country’s nearly 6,000 banks — from large players like Bank of America to small community banks — pulled in more than $171 billion in profits last year, according to the Federal Deposit Insurance Corp. That is up nearly 5 percent from 2015 and even surpasses the levels reached before the financial crisis when banks were profiting from a hot housing market.

Rising bank profits and the prospect of deregulation during the Trump administration have helped propel bank stocks recently. Goldman Sachs stock is trading at record levels since Trump's election. During an investor day presentation this week, JPMorgan Chase, the largest bank in the country, said it expects to get bigger and more profitable in the next few years. The bank's assets could reach about $2.6 trillion this year from $2.49 trillion at the end of 2016. The bank projects net income to reach $30 billion in the next few years, beating the record it set last year, at $24.7 billion

The industry is achieving those profits despite having to comply with hundreds of new regulations called for under 2010’s financial reform law, known as Dodd Frank. Profits have also been hampered by the Federal Reserve keeping key interest rates low, which has made it more difficult for banks to make a profit on loans, industry analysts say.

“Hard data on bank earnings and lending should lay to rest any notion that financial regulations are holding back the American economy, or getting in the way of American banks making money,” Marcus Stanley, policy director at Americans for Financial Reform, said in a statement. “These claims are just an excuse to dismantle hard-won protections for consumers and financial stability.”

Since the financial crisis, the banking industry has largely thrived, according to the FDIC data. There are fewer bank failures, fewer institutions labeled “troubled banks” by regulators and fewer unprofitable institutions.  The FDIC found that of the country’s 5,913 banks, only 248 were unprofitable last year. That is lower than pre-financial-crisis levels and down significantly from the more than 2,000 banks that were losing every year in 2007 and 2008. Five banks failed in 2016, the smallest number since 2007, the government data showed.


Full-year 2016 net income was $171.3 billion. (Source: FDIC)

The number of institutions on the FDIC's “Problem Bank List” fell to 123 — the smallest number since 2008. (Source: FDIC)

But, industry officials say, the industry's health does not tell the entire story. While the industry may be strong, there are also fewer banks as some smaller institutions merge after struggling under new regulatory burdens, they say.

“Regulatory pressures and greater capital requirements were challenges that helped drive 251 banks to merge in 2016,” James Chessen, the chief economist of the American Bankers Association, said in a statement. “While the industry’s solid performance as a whole demonstrates a very resilient banking system, the underlying regulatory pressures driving community banks to sell or merge can’t be ignored. A tailored system of regulation would go a long way toward allowing banks of every size to be successful in their communities.”

Trump has said he wants to “dismantle” Dodd Frank and Republicans in Congress are preparing legislation that would adjust major components of the law. Rep. Jeb Hensarling, the Republican chairman of Financial Services Committee, for example, has proposed eliminating a rule that prohibits banks from making risky bets with their own capital. Other proposals include lowering how much capital a bank must have to withstand future economic calamities.

Democrats in Congress and consumer advocates are preparing to fight regulatory roll backs. The industry needs more oversight, not less, they say.

“Republicans want an anything goes regulatory regime. Dodd-Frank clearly isn’t hurting their bottom line, but a record profit isn’t enough for these guys. They want more and they’re willing to strip away the important consumer and investor protections in Dodd-Frank to get it,” Rep. Maxine Waters (Calif.), the ranking Democrat on the House Financial Services Committee, said in a statement.

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