Friday, May 10, 2024

As the week’s earnings reports come to a close, we wanted to devote today’s post specifically to the banking industry — which is still feeling the pressure of tight net interest margins and non-performing assets.

Calcbench maintains a template that tracks the disclosures banks make in their earnings releases, and we now have Q1 2024 data for more than 200 banks. So what do the trends tell us so far? 

Figure 1, below, shows the ratio of non-performing assets as a percentage of total assets. As you can see, that percentage has been gliding upward since mid-2023 and continued to do so in the first three months of this year.

Nothing to panic about; percentage levels are still well below 1 percent of all assets. Then again, it also depends on the bank; institutions with high exposure to commercial real estate might face higher “NPA” levels than those with less exposure. It’s a good thing that we had a post earlier this year about how to track banks’ exposure to commercial real estate.

Figure 2, below, shows net interest margin — that is, the spread between the interest rate a bank pays on customer deposits and the interest rate it receives from loans. For example, when a bank extends loans at 8 percent and pays 5 percent to depositors, the net interest margin is 3 percent. 

You can see that margin continues to be quite compressed, which has been the case since late 2022; and margins continue to fall overall. That should imply a decline in net interest income— and when we checked the math, comparing several hundred banks from Q1 2023 to Q1 2024, that was indeed the case. Total net interest income whiskered downward from $154.7 billion to $154.2 billion, and average net interest income dropped from $398.8 million to $390.4 million.

So, what does all this mean? Are depositors getting wiser and demanding better rates on their savings accounts? Are banks responding to that pressure by raising depositor rates, which therefore narrows the net margin? 

You can answer those questions if you know where to look in the earnings release and the quarterly filings. Calcbench specializes in data that can be found deep within both: average interest rates, deposit volumes, loan performance metrics, and more. 

Premium Calcbench subscribers can see our spreadsheet detailing interest rate spreads for the entire 260+ group we studied, and lots of other data besides that. Email us at if you’d like to know more.

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