Journal Article

Bank Profitability Rebounds despite Compressed Interest Margins

Abstract: While traditional sources of U.S. bank revenues have struggled during the pandemic, overall bank profitability has soared. This unusual deviation is largely explained by a substantial decline in banks’ loan loss provisions. Extraordinary policy measures undertaken by the Federal Reserve and U.S. Treasury aided a rebound in financial market conditions and, in turn, reduced projected loan losses. However, this effect is likely to be transitory, suggesting an uncertain future for bank profitability.

Keywords: Banking; Bank profitability;

JEL Classification: G21;

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Bulletin

Publication Date: 2021-11-17

Issue: November 17, 2021