September 5, 2019 / 2:39 PM / 7 months ago

U.S. banking sector second quarter profits rise 4.1% year on year to $62.6 billion

WASHINGTON (Reuters) - The U.S. banking sector reported $62.6 billion in profits for the second quarter of 2019, a 4.1% increase from the year-ago period, according to data from the Federal Deposit Insurance Corporation (FDIC).

The FDIC said the profits were driven by higher net interest income.

The FDIC also reported that the number of “problem banks” fell from 59 to 56 in the second quarter, the lowest level since the first quarter of 2007.

Five new U.S. banks opened during the second quarter while one institution failed, the FDIC said.

Community banks’ average net interest margins, a key measure of bank profitability, continued to increase to $6.9 billion, an 8.1% jump from a year ago.

The FDIC data showed that more farmers were falling behind on loans held by community banks compared with a year earlier, and that it was watching risks in the agriculture sector.

Large institutions have benefited more than community banks from rising short-term interest rates, the FDIC data showed. Given the recent cuts in short-term interest rates by the U.S. Federal Reserve, the banking regulator said it could see a future reversal of the trend.

“Awareness of interest rate, liquidity, and credit risks at this stage of the economic cycle will position banks to be more resilient in maintaining lending through the economic cycle,” said Jelena McWilliams, head of the FDIC.

Reporting by Katanga Johnson; Editing by Chizu Nomiyama and Marguerita Choy

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