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Quarterly Banking Profile: Banking Net Income Declines in Q2

Quarterly Banking Profile: Banking Net Income Declines in Q2

Posted: Sep 13 2023
FDIC-insured banks and savings institutions earned $70.8 billion in the second quarter of 2023, a decline of $9 billion from the first quarter, according to the agency’s most recent Quarterly Banking Profile, released yesterday. However, after excluding nonrecurring accounting gains from the Silicon Valley Bank and Signature Bank acquisitions that occurred in Q1 and Q2, net income was roughly flat from the previous two quarters, the agency added.

Total deposits declined for the fifth consecutive quarter, FDIC Chairman Martin Gruenberg said in his summary of the report. Still, deposit outflows moderated substantially, and while there was an outflow of deposits from smaller banks to the largest banks in Q1, that did not appear to be the case in Q2. Global systemically important banks reported a 1.2% decline in total deposits, driven by a 3% drop in uninsured deposits. “Rather than a simple story of deposits flowing to the largest banks, the second quarter’s deposit story appears to have been more about pricing pressures from depositors seeking higher yields, often at nonbank financial institutions, particularly money market mutual funds,” he said.

The Deposit Insurance Fund balance was $117 billion on June 30, up approximately $900 million from the end of the Q1, Gruenberg said. The reserve ratio—the fund balance relative to insured deposits—decreased by one basis point to 1.10% as insured deposits increased at a rate slightly higher than the DIF balance. Despite the Q2 decline, the reserve ratio currently remains on track to reach the 1.35% minimum reserve ratio by the statutory deadline of September 2028, he added.

Total loans increased by $86.5 billion during the quarter, or 0.7%. An increase in credit card balances and loans to nondepository institutions offset declines in commercial and industrial and auto lending, Gruenberg said. The banking industry reported annual loan growth of 4.5% from the previous year, which was led by higher one-to-four family residential mortgages, consumer loans and nonfarm, nonresidential commercial real estate mortgages.
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