U.S. Bank Profits Jump 79.5% as Large Firms Shake Off Failed Bank Costs

• Profits for the U.S. banking sector surged 79.5% to US$64.2Bn in the first quarter of 2024, boosted primarily by large banks not shouldering billions in special fees they were directed to pay to recover costs incurred by bank failures last spring. The Federal Deposit Insurance Corporation said most of the higher profits were due to banks not realizing that assessment, which drove down bank profits at the end of 2023.
• Firms also enjoyed boosts in non-interest income and lower provision expenses. Specifically, the FDIC said bank non-interest expense dropped $22.5Bn in the first quarter and was the primary cause of the profit boost. The decline in special assessment costs accounted for over half of those lower expenses.
• Overall, the FDIC said asset quality metrics remained generally favourable, but noted a deterioration in credit card and commercial real estate (CRE) portfolios. In particular, the FDIC said the non-current rate for non-owner occupied CRE loans was now at 1.59%, its highest level since the fourth quarter of 2013, driven primarily by office portfolios at large banks.
• The FDIC also said its "problem bank list" expanded from 52 firms to 63 in the first quarter, and the total assets at those banks rose to $82.1Bn. Currently, 1.4% of total banks are considered "problem banks," which the FDIC said falls within its normal range.
• Bank deposits were up for the second straight quarter, climbing 1.1% or $190.7Bn. Estimated uninsured deposits grew 0.9%, marking its first increase since the end of 2021.

(Source: Reuters)