US banks' earnings declined 7.7 per cent in the January-March quarter from a year earlier, as higher interest rates dampened demand for mortgage refinancing and reduced banks' revenue from the mortgage business.
The data issued on Wednesday by the Federal Deposit Insurance Corp highlighted the impact of the increase in interest rates that occurred in the spring of 2013.
It was only the second time in the last 19 quarters that the banking industry, which has been recovering from the financial crisis, posted a decline in net income from the year-earlier quarter.
The FDIC reported that the banking industry earned $US37.2 billion ($A40.2 billion) in the first quarter of this year, down from $US40.3 billion in the same period in 2013.
It was the first time since the third quarter of 2013 that banks marked a year-over-year profit decline - and that was the first decline since the spring of 2009, when the country was still mired in the Great Recession.
The latest report also showed the number of banks on the FDIC's problem list fell to 411 in the first quarter from 467 in the fourth quarter of last year.
Despite recent declines, long-term mortgage rates still are nearly a full percentage point above record lows reached about a year ago.
The increase over the year was driven in part by speculation that the Federal Reserve would reduce its bond purchases, which have helped keep long-term interest rates low.
Indeed, the Fed has announced four declines in its monthly bond purchases since December because the economy appears to be healing.
But the Fed has no plans to raise its benchmark short-term rate from record lows.
Reduced income from trading also contributed to the first-quarter decline in banks' profit, the FDIC said.
The health of the banking industry continued to improve in the first quarter, with sour loans on the books declining, lending getting more robust and fewer banks unprofitable, FDIC officials said.
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