Bank profitability in 2026 is the strongest it has been in several years, and the reason is not just lower interest rates. The FDIC's Quarterly Banking Profile for the second quarter of 2026, released August 25, 2026, shows the 4,238 insured institutions earned $90.1 billion, up 12.0% from the first quarter and 28.7% from a year earlier, for a return on assets of 1.37% [1][2]. The industry net interest margin edged up to 3.32%, loans grew 6.8% year over year, domestic deposits rose for an eighth straight quarter and the net charge-off rate fell to 0.57% [2]. JPMorgan Chase (JPM) and Bank of America (BAC) both reported higher net interest income in the quarter as the federal funds rate held at 3.63%, down from 4.33% a year earlier, as of September 16, 2026 [3][4][5]. This note breaks profitability into its three parts: margin, deposits and credit.
Why is bank profitability in 2026 improving?
The FDIC's numbers show all three revenue drivers moving in the right direction at once. Net interest income rose $5.3 billion, or 2.8%, from the first quarter and $15.4 billion, or 8.5%, from a year earlier [2]. Noninterest income rose $5.5 billion, or 6.1%, on trading and fee revenue, and securities gains added $5.5 billion, mostly from one-time equity transactions [2]. Provision expense fell $2.1 billion, or 10.0%, from the prior quarter to $19.3 billion and was $10.7 billion, or 35.8%, lower than a year earlier [2]. The only line moving against banks was noninterest expense, up $4.4 billion, or 2.8%, from the first quarter to $164.3 billion [2].
| FDIC-insured institutions, Q2 2026 | Level | Change from Q1 2026 |
|---|---|---|
| Net income | $90.1 billion | +12.0% [2] |
| Return on assets | 1.37% | Up from 1.26% [2] |
| Net interest margin | 3.32% | +1 basis point [2] |
| Provision expense | $19.3 billion | -10.0% [2] |
| Net charge-off rate | 0.57% | -2 basis points [2] |
| Total loans | Not stated | +1.8% (+6.8% year over year) [2] |
Net interest margin: a small gain with a healthy cause
The industry margin rose one basis point to 3.32% because the yield on earning assets rose 2.3 basis points while the cost of funds rose only 1.6 basis points [2]. That is the pattern banks want: asset yields repricing faster than deposit costs. With the effective federal funds rate at 3.63% in June, July and August 2026 according to DataPorium's economic metrics, compared with 4.33% in August 2025, deposit costs have room to keep falling while loan books still carry higher-yielding paper from 2024 and 2025 [5]. Readers can track the policy rate and other series on DataPorium's economic metrics page.
The two largest banks
JPMorgan Chase reported net interest income of $25.6 billion for the second quarter, up 10% from a year earlier, with net interest income excluding its Markets business at $23.7 billion, up 4% [3]. Firmwide average loans rose 10% year over year and average deposits in Consumer and Community Banking rose 3% [3]. Reported net income was $21.2 billion, or $7.70 per share, but $16.9 billion, or $6.14 per share, excluding significant items, on managed revenue of $58.0 billion, up 27% as reported and 15% excluding those items [3]. Return on tangible common equity was 29% reported and 23% adjusted, with a 14.1% CET1 ratio [3].
Bank of America reported net income of $9.07 billion, up from $7.65 billion a year earlier, and earnings per share of $1.21 versus $0.98 [4]. Revenue net of interest expense was $31.72 billion, up from $28.53 billion, and net interest income was $16.16 billion versus $15.92 billion [4]. Its net interest yield was 2.08%, up from 1.94% a year earlier, on average loans and leases of $1.217 trillion, up 7.9% from $1.128 trillion [4]. The CET1 ratio was 12.5% [4].
Deposits: eight quarters of growth
Domestic deposits at FDIC-insured institutions grew 0.8% in the second quarter, the eighth consecutive quarterly increase [1]. That matters because the deposit outflows of 2022 and 2023 forced banks to pay up for wholesale funding; stable deposit growth at a lower policy rate is what lets margins expand. Bank of America's interest-bearing deposits averaged $1.49 trillion in the quarter, and JPMorgan's consumer bank deposits rose 2% from the first quarter [3][4]. Loan growth of 6.8% year over year across the industry means banks are putting those deposits to work rather than parking them in securities [2].
Credit costs: improving, with card and office watched closely
Asset quality improved across the board. Past-due and nonaccrual loans fell nine basis points to 1.44% of total loans, with the largest declines in nonfarm nonresidential commercial real estate, down 14 basis points to 1.52%, credit cards, down 27 basis points to 2.81%, commercial and industrial loans, down 11 basis points to 1.27%, and residential mortgages, down 8 basis points to 2.00% [2]. The net charge-off rate fell two basis points to 0.57% and was three basis points below a year earlier, and the reserve coverage ratio rose to 172.7% of noncurrent loans [2]. JPMorgan's card services net charge-off rate was 3.34% and its firmwide net charge-offs were $2.4 billion against a $2.5 billion provision, while Bank of America's provision was $1.37 billion versus $1.31 billion a year earlier [3][4].
- Margin: industry NIM 3.32%, Bank of America yield 2.08%, JPMorgan NII up 10% [2][3][4].
- Deposits: domestic deposits up 0.8%, eighth straight quarterly gain [1].
- Credit: charge-off rate 0.57%, provisions down 35.8% year over year [2].
- Capital: CET1 of 14.1% at JPMorgan and 12.5% at Bank of America [3][4].
What it means for bank stocks and the economy
DataPorium's sector data shows NASDAQ financial services stocks fell 1.77% on average on September 16, 2026, after trading at an average price to earnings ratio of about 20.8 in early July, so the market is not treating a 1.37% return on assets as a reason to pay a premium [5]. Community banks, which the FDIC says represent 90% of insured institutions, earned $8.7 billion, up 8.2% from the first quarter, with a pretax return on assets of 1.53%, and the Deposit Insurance Fund reserve ratio rose to 1.48% with one bank failure in the quarter [2].
Banks are earning more because margins, deposit growth and credit quality are all improving at the same time, a combination that typically appears when the policy rate has fallen but the economy has not.
The economic reading is favorable. A banking system with a 1.37% return on assets, 172.7% reserve coverage and a 1.48% insurance fund ratio is one that can fund business investment without public support [2]. The market-oriented case is to keep it that way by letting capital and liquidity standards do the work rather than adding layers of supervision that raise the $164.3 billion quarterly noninterest expense further [2]. The fair counterpoint is that part of the second-quarter gain came from one-time securities gains of $5.5 billion, and credit card delinquencies at 2.81%, while lower, remain elevated relative to the pre-2023 period, so investors may consider the underlying trend rather than the headline [2].
Key takeaways
- FDIC-insured banks earned $90.1 billion in Q2 2026, up 12.0% from Q1 and 28.7% from a year earlier, for a 1.37% return on assets [2].
- The industry net interest margin rose to 3.32%, with asset yields rising faster than funding costs as the federal funds rate held at 3.63% [2][5].
- Domestic deposits grew for an eighth consecutive quarter and loans rose 6.8% year over year [1][2].
- The net charge-off rate fell to 0.57% and provisions dropped 35.8% year over year, though card delinquencies of 2.81% remain elevated [2].
- JPMorgan's net interest income rose 10% to $25.6 billion and Bank of America's net interest yield rose to 2.08% [3][4].
Frequently asked questions
What is the average bank net interest margin in 2026?
The FDIC reports an industry net interest margin of 3.32% for the second quarter of 2026, up one basis point from the first quarter [2].
Are bank profits rising or falling in 2026?
Rising. Quarterly net income for FDIC-insured institutions was $90.1 billion in Q2 2026, up 12.0% from the prior quarter and 28.7% from a year earlier [2].
Are loan losses increasing at US banks?
No. The industry net charge-off rate fell to 0.57% and past-due and nonaccrual loans fell to 1.44% of total loans in Q2 2026, with credit card delinquencies down to 2.81% [2].
How did JPMorgan and Bank of America perform in Q2 2026?
JPMorgan earned $21.2 billion reported, or $16.9 billion excluding significant items, with net interest income up 10%; Bank of America earned $9.07 billion with a 2.08% net interest yield [3][4].
Sources & References
- [1] FDIC press release: FDIC-Insured Institutions Reported Return on Assets of 1.37 Percent and Net Income of $90.1 Billion in Second Quarter 2026 (August 25, 2026)
- [2] FDIC Quarterly Banking Profile, Second Quarter 2026 (PDF)
- [3] JPMorgan Chase Second Quarter 2026 Earnings Release, Exhibit 99.1 (SEC EDGAR, July 14, 2026)
- [4] Bank of America Second Quarter 2026 Financial Results, Exhibit 99.3 (SEC EDGAR, July 14, 2026)
- [5] DataPorium Economic Metrics: federal funds rate series and sector performance
