“They’re not back to normal,” a Minneapolis Federal Reserve official said.
Minnesota’s community banks chalked up small improvements overall in the second quarter, but the pace of growth is slowing somewhat from last year.
“It was expected to slow down a little bit, and that’s what we’re seeing,” said Ron Feldman, executive vice president of the Federal Reserve Bank of Minneapolis.
Feldman released the Minneapolis Fed’s quarterly summary of banking conditions Thursday. Median year-over-year loan growth was 1.6 percent, a major improvement from the shrinkage following the Great Recession, but still far off the 20-year norm of about 5 percent. Profitability, as measured by the return on average assets, was just below historic norms.
“The things that got banks into the financial crisis are gone,” Feldman said. “The thing that’s been challenging is for banks to get back to the level of profitability and growth that one would expect looking at long-term norms.”
“They’re not back to normal,” he said.
The decline in profitability isn’t enough to starve banks for capital but it partly explains the state’s long-term trend toward bank consolidation, he said.
Feldman had earlier expected median loan growth to be 3 percent to 7 percent this year but now thinks it will be in the bottom part of that range.
Jennifer Bjorhus • 612-673-4683