U.S. Banks Reap 79.5% Profit Jump Amid Recovery from Previous Failures

Increase in U.S. bank profits by 79.5% as major banks avoid failed bank costs. FDIC highlights asset quality, loan portfolio concerns.

May 29, 2024 - 10:22
May 29, 2024 - 10:22
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U.S. Banks Reap 79.5% Profit Jump Amid Recovery from Previous Failures
U.S. Banks Reap 79.5% Profit Jump Amid Recovery from Previous Failures

In the first quarter of 2024, profits for U.S. banks surged by a whopping 79.5%, reaching $64.2 billion. This boost was largely thanks to major banks dodging special fees aimed at covering costs from past bank failures.

The Federal Deposit Insurance Corporation (FDIC) revealed that this impressive profit spike was mainly because banks weren't required to pay the special assessment, which had dented profits in late 2023. Additionally, banks enjoyed higher noninterest income and slashed provision expenses.

According to the FDIC, bank expenses dropped by $22.5 billion in the first quarter, playing a significant role in the profit surge. The reduction in special assessment costs made up more than half of this expense decline.

While overall asset quality looked good, the FDIC pointed out some cracks in credit card and commercial real estate (CRE) portfolios. Notably, the noncurrent rate for non-owner occupied CRE loans hit 1.59%, its highest since late 2013, mainly due to office portfolios at major banks.

FDIC Chairman Martin Gruenberg praised the industry's resilience but stressed the need for monitoring loan portfolios showing signs of deterioration.

The FDIC's "problem bank list" expanded from 52 to 63 firms in the first quarter, with total assets at these banks reaching $82.1 billion. Currently, 1.4% of all banks are classified as "problem banks," a figure within the FDIC's usual range.

Bank deposits saw growth for the second consecutive quarter, rising by 1.1% or $190.7 billion. Additionally, estimated uninsured deposits saw a 0.9% uptick, marking their first increase since late 2021.

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