Lower mortgage revenue drives drop in bank earnings

Bank earnings fell 7.6 percent during the first three months of the year, hampered by falling mortgage and trading revenue.

The Federal Deposit Insurance Corp. (FDIC) said Wednesday that the banking industry reported $37.2 billion in net income during the January-March quarter, down from $40.3 billion in same period of 2013.

"Industry revenue has been affected by narrow margins, modest loan growth and a decline in non-interest income as higher interest rates have reduced mortgage-related activity and trading income fell,” FDIC Chairman Martin Gruenberg said in a statement.

Revenue from the sale, securitization and servicing of mortgages was $4 billion, 53.6 percent lower than a year ago, the report said. 

Gruenberg attributed the increase in long-term interest rates in the second quarter of 2013 to the decline in income.

He noted that mortgage income over the past three quarters has amounted to about half of what it was over the previous six quarters.

The first-quarter drop in income was only the second time in the past 19 quarters that the banking industry has experienced a drop in earnings.

Still, despite the decline in earnings, more than half of the 6,730 insured institutions reporting — 54 percent — had year-over-year growth in quarterly earnings.

The proportion of banks that were unprofitable during the first quarter fell to 7.3 percent from 8.5 percent a year earlier. 

Also, the FDIC's list of problem banks fell to 411 from 467.