Quarterly Banking Profile: Banking net income declined in Q3

FDIC-insured banks and savings institutions earned $68.4 billion in the third quarter of 2023, a decline of $2.4 billion from the second quarter, according to the agency’s most recent Quarterly Banking Profile, released today. The report also shows that net income for the past four quarters has been relatively flat after excluding the one-time gains from the accounting treatment of the Silicon Valley Bank, Signature Bank and First Republic Bank failures earlier this year.

Total deposits declined by $90.4 billion or 0.5% between the second and third quarters, making the sixth consecutive quarter in deposit declines. Interest-bearing deposits increased, while noninterest-bearing deposits fell. Estimated insured deposits were up $6.9 billion or 0.1%. The Deposit Insurance Fund balance was $119.3 billion on Sept. 30, up approximately $2.4 billion from the second quarter, largely reflecting increased assessment revenue. The reserve ratio increased two basis points in the third quarter to 1.13%.

Total loan and lease balances increased by $45.9 billion or 0.4% from the previous quarter. An increase in credit card loans, up $25.9 billion or 2.5%, and one-to-four family residential mortgages, up $23.1 billion or 0.9%, drove loan growth. Also in the third quarter, two banks opened, 28 institutions merged and two banks voluntarily liquidated.

“The banking industry continued to show resilience in the third quarter,” FDIC Chairman Martin Gruenberg said. “Net income remained high, overall asset quality metrics remained favorable, and the industry remained well capitalized. The banking industry still faces significant downside risks from the continued effects of inflation, rising market interest rates, and geopolitical uncertainty. In addition, deterioration in the industry’s commercial real estate portfolio is beginning to materialize in office properties. These issues, together with funding and earnings pressures, will remain matters of ongoing supervisory attention by the FDIC.”

ABA: Banks ‘remain on firm footing’

The FDIC’s latest Quarterly Banking Profile indicates that the banking industry remains on firm footing even as economic headwinds persist, American Bankers Association Chief Economist Sayee Srinivasan said. Loans grew in the quarter, credit quality remained strong and net income remained high by historical standards, he noted.

“Deposits moderated slightly but remained at healthy levels,” Srinivasan said. “With a strong base of reserves to cover potential credit losses, banks pulled back slightly on provisioning in the third quarter while keeping an eye toward future risks.

“The industry remains well capitalized, as Chair Gruenberg noted, and continues to display remarkable resilience despite the challenges posed by inflation, the rise in interest rates and global events,” Srinivasan added.