Profits of U.S. banks surged 79.5 percent to $64.2 billion in the first quarter of 2024 due primarily to the large decline in non-interest expense because of several substantial, non-recurring items recognized by large banks in the prior quarter. In addition, higher non-interest income and lower provision expenses contributed to the quarterly increase.
Reports from 4,568 commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) revealed that the non-interest expense of U.S. banks saw a 13.3 percent decline due mainly to the increase in net income. Meanwhile, non-interest income saw a 15.2 percent increase, up $10.3 billion, while provision expenses saw a 17.3 percent decline, down $4.3 billion.
“The banking industry continued to show resilience in the first quarter. Net income rebounded, asset quality metrics remained generally favorable, and the industry’s liquidity was stable,” stated FDIC chairman Martin J. Gruenberg.
U.S. banks reported an aggregate return-on-assets ratio (ROA) of 1.08 percent in Q1 of 2024, up from 0.61 percent in Q4 of 2023. However, ROA saw a decline from 1.36 percent in Q1 of 2023.
Asset quality metrics remain favorable
The FDIC said that U.S. banks’ asset quality metrics remained favorable with the exception of material deterioration in credit card and commercial real estate portfolios. Loans that were 90 days or more past due or in non-accrual status increased to 0.91 percent of total loans, up five basis points from Q4 of 2023 and 16 basis points from Q1 of 2023. Commercial loans, industrial loans, and non-owner-occupied CRE loans led this increase in Q1. However, despite the recent increases, the industry’s total noncurrent ratio remains 37 basis points below the pre-pandemic average of 1.28 percent.
“The banking industry still faces significant downside risks from the continued effects of inflation, volatility in market interest rates, and geopolitical uncertainty. In addition, deterioration in certain loan portfolios, particularly office properties and credit cards, continues to warrant monitoring,” added Gruenberg.
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Domestic deposits rise
Domestic deposits in U.S. banks increased $190.7 billion or 1.1 percent from Q4 of 2024, marking a second consecutive quarterly increase. The 4 percent increase in transaction accounts contributed to that increase, offsetting the 1.5 percent decline in savings deposit balances.
The data also reveals that estimated insured deposits increased $114.9 billion or 1.1 percent, while estimated uninsured domestic deposits increased $63.3 billion or 0.9 percent during Q1, the first quarterly increase since Q4 of 2021. After seven consecutive quarters of growth, brokered deposits declined $10.2 billion or 0.8 percent compared to Q4 of 2023.
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