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US banks just recorded their most profitable quarter EVER

The new high-water mark for bank profits came even as net income for the Big Four mostly declined.

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Coast-to-Coast | Getty Images

American banks spent the second quarter crying all the way to the, well, bank.

Despite an increasing regulatory burden and amid lackluster share performance, the industry logged record profits for the period, topping the second quarter of 2015, according to figures from SNL Financial and S&P Global Market Intelligence.

Profits for the three-month period totaled $43.6 billion, compared to the $43.01 billion in Q2 of 2015, a 1.4 percent beat. On a sequential basis, the April-to-June period topped the previous quarter by $4.56 billion, an 11.7 percent rise.


The performance comes as banks adapt to a tougher regulatory environment for risk and higher capital requirements. The Dodd-Frank reforms, which Congress developed in the wake of the 2008 financial crisis, require banks to keep more cash on hand and restrict them from engaging in trading for their own profit.

The Federal Reserve also has adopted more stringent stress-test standards. Nonetheless, all U.S.-domiciled banks passed the most recent round despite a handful of objections raised.

Also, despite a continued low-rate environment that is supposed to pressure banks' net interest margins, the sector is still managing to roll up profits.

Still, banks remain a popular political target, with both major party presidential candidates targeting them to varying degrees

While the Democratic and Republican party platforms both endorse bringing back the Glass-Steagall law that prevented the commingling of investment and commercial banking, Republican Donald Trump has vowed to roll back Dodd-Frank. Democrat Hillary Clinton, while accepting $41.4 million in contributions from the finance industry, has taken a harder line on big banks and is looking for a more accommodative environment for smaller institutions.

One other interesting aspect of the record quarter is that the Big Four — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — didn't do the heavy lifting. In fact, while all four had profitable quarters, JPMorgan was the only one to record net income growth compared to the same period a year ago, according to SNL. The other three saw combined declines of nearly $1.4 billion.

From a market standpoint, banks have been under pressure all year.

As a broad category, S&P 500 financials have been the worst-performing sector with a return of just 0.43 percent heading into Thursday trading. The KBW Nasdaq Bank index specifically has lost nearly 4 percent for 2016, though it is up 8.25 percent in the third quarter.

—An earlier version misstated Hillary Clinton's campaign contributions.