Wednesday, September 27, 2023

U.S Bank Profits fell from $70.4 billion to $69.5 billion in the third quarter due to shrinking loan loss provisions.

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U.S banks profits fell to $69.5 billion, which is 1.2% than the second quarter. Firms were slower to shrink their loan loss provisions. Also, banks have to deal with the lower interest rates, FDIC reports.

US bank profit loss due to the shrinking loan loss provision
U.S Bank Profits fell from $70.4 billion to $69.5 billion in the third quarter due to shrinking loan loss provisions.

U.S banks’ profits were recorded at $70.4 billion in the second quarter. Even during the post-pandemic period, banks reported significantly higher profits than the previous year’s second quarter -up 281% from the 2nd quarter 2020-.

However, banks are still up to approximately 36% from the same time 2020, even within banks and financial institutes rushing to set funds aside from the profits to secure against pandemic-driven loan losses.

Shrinking the Loan Loss Provisions Will Lead to What?

Since the first quarter, banks have been shrinking the loan loss provisions up to the third quarter. However, the rate is slowed down in the third quarter by dropping by $5.2 billion compared to the $10.8 billion in the second quarter. Moreover, only 14% of the banks reported that they would increase the credit loss provision from the first quarter.

While the banks shrink their reserves, non-current loan rates for banks fell from 6.3% to 0.94%. Financial experts predict this rate may fall down to 0.19%, the lowest record in history.

However, the total loan balances of the banks reported a slight increase. Tow-third of the banks reported an annual growth. In the same vein, 96% of the banks reported profitable.

FDIC Chairman Jelena McWilliams stated, “with strong capital and liquidity levels to support lending activities and protect against potential losses, the U.S banking industry keeps supporting country’s  needs for financial services while navigating the challenges presented by the pandemic.”

The net interest margin for the banks is up from the recorded low in the second quarter from 2.56%. Banks reported $5.2 billion in an increase in the interest income, which is a slight uptrend from the prior quarter.

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