US bank profits climb 7.8% on higher interest income: FDIC

US banks reported US$64.4 billion in profits in the second quarter of 2022, as higher net interest income offset growing reserves to guard against loan losses, the Federal Deposit Insurance Corporation (FDIC) said Thursday (Sep 8).

However, bank profits were down 8.5 per cent from a year ago, driven primarily by larger banks boosting their provision expenses for potential losses in the face of growing economic uncertainty.

“The banking industry continues to face significant downside risks. These risks include the effects of high inflation, rapidly rising market interest rates, and continued geopolitical uncertainty,” said FDIC acting chairman Martin Gruenberg in a statement. “Taken together, these risks may reduce profitability, weaken credit quality and capital, and limit loan growth in coming quarters.”

The quarterly growth in profits came as interest rates rose and banks expanded their loan balances. And the FDIC said the growth in provision expenses was driven primarily by banks with over US$250 billion in assets.

While a range of factors has upped uncertainty for banks, the FDIC reported that the rate of noncurrent loans – loans that are 90 days or more past due – had fallen to 0.75 per cent, the lowest level seen since 2006. Bank deposits, which had surged during the pandemic, fell 1.9 per cent in the second quarter, the first decline in four years. REUTERS