For the first time in five years, the average net interest margin at US banks rose in 4Q15 over levels a year earlier, according to the FDIC’s latest Quarterly Banking Profile released today. The 3.13% NIM just topped the 3.12% NIM of late 2014. Most of the margin gain came at larger banks, where the late 2015 rise in short-term interest rates lifted asset portfolio performance. The QBP is at FDIC.gov.
But rate risk offsets retained earnings
Although rising rates helped US bank NIMs and contributed to $13.5 billion in retained earnings, market value losses in securities almost fully offset the gain. Accumulated other comprehensive income declined by $13.5 billion as higher rates reduced unrealized securities gains. Rising retained earnings and falling securities values left total bank equity capital up only 0.2%.
NIM down at community banks
NIM at community banks dropped to 3.60% from 3.63% a year before, although balance sheet growth still pushed up net interest income by 7%. Average asset yields fell faster than funding costs.
Securities trend follows bank size
Across all banks, securities made up 21.0% of assets up 4 basis points from a year ago. Most of the growth in securities portfolios came at larger banks since securities at community banks ended 2015 at 20.7% of assets, down from 21.7% a year before.