U.S. bank profits dip on slower reduction in loan loss provisions
U.S. bank profits fell 1.2% in the
third quarter of 2021 to $69.5 billion as firms were slower to shrink their
credit loss provisions and grappled with low interest rates, the Federal
Deposit Insurance Corporation reported Tuesday.
Bank profits are still up nearly 36%
from the same time a year ago when banks were still rushing to set aside funds
to guard against pandemic-driven loan losses.
Banks have been shrinking those loan
loss provisions for three straight quarters, but slowed the rate of decline in
the third quarter, dropping it by $5.2 billion compared to 10.8 billion in the
second quarter.
As banks continued to shrink those
reserves, the rate of non-current loans for banks fell to 6.3%. The net
charge-off rate for loans no longer expected to be repaid fell to 0.19%, the
lowest level on record.
Total loan balances were up
slightly, as two-thirds of all banks reported annual profit growth. Nearly 96%
of banks were profitable.
"With strong capital and
liquidity levels to support lending and protect against potential losses, the
banking industry continued to support the country's needs for financial
services while navigating the challenges presented by the pandemic," said
FDIC Chairman Jelena McWilliams in a statement.
The net interest margin for banks
rose from a record low in the second quarter to 2.56%, as banks reported a $5.2
billion in increase in interest income, a slight uptick from the quarter prior.
Source: Reuters