US bank profits jump 11% in second quarter of 2024 as expenses shrink

THE US banking industry recorded profits of US$71.5 billion in the second quarter of 2024, up 11.4 per cent on the prior quarter, the Federal Deposit Insurance Corporation (Fdic) reported on Thursday (Sep 5).

Profits were boosted by shrinking expenses, as well as higher non-interest income, the regulator said. However, it also noted that signs of strain in commercial real estate and credit card borrowing had jumped to levels not seen in a decade.

“The banking industry continued to show resilience in the second quarter,” Fdic chairman Martin Gruenberg said in a statement. “However, the industry continued to report weakness in several loan portfolios, which we are monitoring closely.”

Specifically, the Fdic noted that the non-current rate for non-owner occupied commercial real estate loans rose to 1.77 per cent, hitting the highest level since 2013.

On the consumer front, the net charge-off rate for credit cards, effectively the amount of credit card balances banks do not expect to collect, rose to 4.82 per cent, its highest since 2011.

Bank profits were boosted by shrinking expenses, most notably a US$4 billion reduction in reported expenses related to the special assessment banks must pay to help the Fdic recover costs stemming from the bank failures of 2023.

Profits also grew due to US$10 billion in one-time gains from equity security transactions by banks. Non-interest expenses were down 2.4 per cent in the quarter, although provision expenses for potential losses climbed, particularly at larger banks, where they were up US$3.3 billion, or 30.3 per cent from the prior quarter. REUTERS