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US banks grew net income 3.1% in Q2'19

Balance sheet growth drove the U.S. banking sector to a new profitability record in the second quarter of 2019. After accounting for JPMorgan Chase & Co.'s intercompany consolidation, net income for all U.S. commercial banks, savings banks, and savings and loan associations reached $62.57 billion, up 3.1% on a quarter-over-quarter basis.

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Institutions with less than $10 billion in total assets are increasingly contributing less to the industry's net income. The group's contribution was 15.1% in the second quarter, down from 18.5% three years ago.

Except for a tax-related blip in the fourth quarter of 2017, the four largest U.S. banks by total assets — JPMorgan Chase Bank NA, Bank of America NA, Wells Fargo Bank NA and Citibank NA — have provided between 38% and 44% of quarterly aggregate net income since 2016. For the second quarter, the Big Four U.S. banks were responsible for 41% of total net income.

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Banks and thrifts continued to get bigger during the second quarter. Total assets increased 1.0% from March 31. Total loans and leases were up 1.5% quarter over quarter, with deposit growth trailing at 0.8%.

Reversing a four-quarter trend, the sector grew noninterest-bearing deposits 1.5% on a quarter-over-quarter basis. JPMorgan added more than $32 billion in zero-cost deposits during the quarter, more than any other institution. On the flip side, Deutsche Bank Trust Co. Americas lost $10.40 billion of noninterest-bearing deposits.

The aggregate net interest margin declined 3 basis points from the first quarter of 2019 to 3.37%. Rising loan yields failed to keep pace with higher funding costs.

Although a handful of regional banks ran into second-quarter credit issues, credit quality in the aggregate remained sterling. Nonperforming assets as a percentage of total assets declined again, as did the early-stage delinquency ratio. The net charge-offs to average loans ratio remained flat versus the first quarter at 0.50%.

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