©Reuters. FILE PHOTO: The Federal Deposit Insurance Corp (FDIC) logo is seen at the FDIC headquarters in Washington, Feb. 23, 2011. REUTERS/Jason Reed/File Photo
By Piet Schroeder
WASHINGTON (Reuters) – U.S. bank earnings remained broadly flat in the second quarter of 2023 after accounting for the impact of three major failed bank takeovers, the Federal Deposit Insurance Corporation reported Thursday.
The banking regulator said earnings in the sector fell 11.3% to $70.8 billion in the second quarter, but that was mainly due to the impact of the bank failures and resulting acquisitions. Taking these events into account, bank profits increased by 5.7% compared to a year earlier.
“Despite the period of stress earlier this year, the banking sector remains resilient,” FDIC Chairman Martin Gruenberg said in a statement. “However, the banking sector continues to face significant challenges due to the effects of inflation, rising market interest rates and geopolitical uncertainty.”
The quarterly bank finance report comes under close scrutiny in the aftermath of the banking industry turmoil in the spring, which saw three major companies, including Silicon Valley Bank, go bankrupt due to large unrealized losses that terrified savers .
Thursday’s results are the first to show the impact of the failure of the Bank of the First Republic (OTC:), which was seized by regulators in May and sold to JPMorgan Chase (NYSE:).
The second quarter results indicate that the spring turmoil for the industry is fading. The FDIC said banks saw unrealized deposits on securities rise 8.3% in the second quarter to $558.4 billion. However, unrealized losses are still lower than mid-2022 levels.
US bank deposits fell for the fifth consecutive quarter, but fell only 0.5% in the second quarter, compared to a record 2.5% decline in the first quarter. The fall in deposits was due to a flight of uninsured deposits, while insured deposits actually increased again in the second quarter.
The FDIC’s list of “problem banks” remained unchanged at 43 companies in the second quarter.
