Banks posted $ 147.9 billion in profits in 2020, a significant drop from record levels in 2019, a regulatory group said on Tuesday.
U.S. bank profits fell 36.5% in 2020 from a year earlier as banks set aside massive sums to hedge against potential losses, but the sector showed signs of strengthening in the fourth. quarter as the economy begins to recover from the COVID-19 pandemic, a regulator reported on Tuesday.
The industry posted $ 147.9 billion in profits in 2020, a sharp drop from the record profits of 2019, according to the Federal Deposit Insurance Corporation (FDIC).
However, bank profits rose 9.1% in the fourth quarter to $ 59.9 billion from a year earlier as companies reduced the amount of cash they set aside to hedge against losses. losses.
FDIC President Jelena McWilliams said the new data shows, despite declining profits, that banks have proven their resilience in the face of the pandemic.
“The banking industry maintains strong capital and liquidity levels, which can mitigate potential future losses,” she said in a prepared statement.
The new data shows the wild swings the banking industry went through in 2020, as businesses scrambled to set aside billions of dollars to guard against the economic cost of the pandemic, to start extracting from those losses in the future. second half of the year.
The profit growth posted by banks in the fourth quarter is mainly due to the contraction of reserves against potential losses. The FDIC said alleged loss of provisions fell 76.5% at the end of 2020 from the end of 2019 to $ 11.4 billion, the lowest level since 1995.
The regulator noted that an imminent challenge for banks is the persistent low rate environment. Banks have seen their interest income decline for five consecutive quarters, and the average net interest margin remained at record levels in the fourth quarter.