Feb 25, 2019

U.S. banks had record profits in 2018

U.S. banks raked in a record $236.7 billion in profits last year.

Why it matters: Even without the boost from the corporate tax cut, banks would have still made more money than ever before, according to the FDIC's latest report.

  • There were zero bank failures in 2018, which hasn't happened since 2006.
  • The average rate of loans more than 90 days late fell below 1% last quarter — the lowest level since 2007.
  • "Regulatory capital and liquidity ratios of key financial institutions, especially large banks, are at historically high levels," the Fed noted in its monetary policy report to Congress on Friday.

The big picture: The good times are also playing out in the stock market.

  • Goldman Sachs, despite the 1MDB scandal, is on track for its best quarter in 3 years and the stock's surge is responsible for 7% of the Dow's 16% rebound since the beginning of 2019, per the Wall Street Journal. (Though, the stock remains down more than 25% since this time last year, after a horrendous 2018.)
  • The KBW — an ETF that tracks the big banks and regionals — has risen 17% this year.

Yes, but: The FDIC issued a stark warning about how long the good times can last. FDIC chair Jelena McWilliams said the lack of bank failures last year is not "the new normal."

  • "We need to be thinking about what may be around the corner and looking for risks, even if we don't have indications [of bank stresses] now."
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