Chairman Martin J. Gruenberg’s Opening Statement
First Quarter 2018 Quarterly Banking Profile
May 22, 2018
Good morning, and welcome to our release of first quarter 2018 results for
FDIC-insured institutions.
The banking industry reported another positive quarter. Net income
increased on higher net operating revenue and a lower effective tax rate.
Loan balances continued to rise, net interest margins improved, and the
number of “problem banks” continued to fall.
Community banks also reported another solid quarter. Their net income
benefitted from higher revenue and a lower effective tax rate, and loan
growth that was stronger than the overall industry.
While the performance of the banking industry has been positive, the
current economic expansion is now the second longest on record. It is
important to remain vigilant to underlying risks in the latter stage of this
economic cycle.
The interest-rate environment and competitive lending conditions continue
to pose challenges for many institutions. Some banks have responded by
“reaching for yield” through investing in higher-risk and longer-term assets.
First Quarter 2018 Quarterly Banking Profile
May 22, 2018
Good morning, and welcome to our release of first quarter 2018 results for
FDIC-insured institutions.
The banking industry reported another positive quarter. Net income
increased on higher net operating revenue and a lower effective tax rate.
Loan balances continued to rise, net interest margins improved, and the
number of “problem banks” continued to fall.
Community banks also reported another solid quarter. Their net income
benefitted from higher revenue and a lower effective tax rate, and loan
growth that was stronger than the overall industry.
While the performance of the banking industry has been positive, the
current economic expansion is now the second longest on record. It is
important to remain vigilant to underlying risks in the latter stage of this
economic cycle.
The interest-rate environment and competitive lending conditions continue
to pose challenges for many institutions. Some banks have responded by
“reaching for yield” through investing in higher-risk and longer-term assets.
Chairman’s Opening Statement First Quarter 2018 Quarterly Banking Profile
2
Going forward, the industry must manage interest-rate risk, liquidity risk,
and credit risk carefully to continue to grow on a long-run, sustainable path.
The industry also must be prepared to manage the inevitable economic
downturn, whenever it comes, smoothly and without undue disruption to the
financial system.
The long-term objective for banks should be to position themselves during
periods of good economic and banking conditions, as exist today, to be
able to sustain lending through the economic cycle so that the industry can
play a counter-cyclical role, and not a pro-cyclical role as occurred during
the financial crisis.
These challenges facing the industry will remain a focus of supervisory
attention.
2
Going forward, the industry must manage interest-rate risk, liquidity risk,
and credit risk carefully to continue to grow on a long-run, sustainable path.
The industry also must be prepared to manage the inevitable economic
downturn, whenever it comes, smoothly and without undue disruption to the
financial system.
The long-term objective for banks should be to position themselves during
periods of good economic and banking conditions, as exist today, to be
able to sustain lending through the economic cycle so that the industry can
play a counter-cyclical role, and not a pro-cyclical role as occurred during
the financial crisis.
These challenges facing the industry will remain a focus of supervisory
attention.