Page 4 - Banking Outlook 2014 - An Industry at a Pivot Point

2 | Banking Outlook 2014: An Industry at a Pivot Point

The Banking Industry is

at a Crossroads

As unlikely as it may seem for an industry that has posted a 70 percent gain in net income since 2009—and
strong growth in return on equity—banks face a major dilemma as they head into 2014. There is no question
the industry has rebounded from the abyss of 2009, when, on the heels of a crippling credit crisis, bank
failures were surging, balance sheets were bloated with bad loans, and industry return on equity (ROE)
stood at a negative 3.7 percent. Since then, banks have slashed payrolls, shed noncore businesses, and
written off trillions of dollars in bad assets.
1
Quarterly Income 2009–2013 ($B)

45
39.02
40
37.43
35.56 35.53
35 33.48
32.65 32.65 32.89
28.97 28.42
30
24.07
25
21.75
20 19.77 19.6
16.34
15
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4.51
5
0
-1.55
-5
-6.49 -8.4
-10
03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 03/11 06/11 09/11 12/11 03/12 06/12 09/12 12/12 03/13 06/13 09/13
Net Operating Income Securities and Other Gains/Losses, Net
Source: Federal Deposit Insurance Corp., December, 2013.
Industry ROE has moved higher than 10 percent for the first time since 2007.

U.S. Banks’ ROE (%)

14
12.28 12.39 12.96
12 11.58
10.44
10
8.73
8 7.5
6 5.75
4
2 1.4
0
-2
-4
-3.68
-6
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Federal Deposit Insurance Corp., December, 2013.

1 “I.M.F. Puts Bank Losses from Global Financial Crisis at $4.1 Trillion,”
by Mark Landler, The New York Times, 4/21/09