U.S. bank profits slow on lower noninterest income, higher realized losses

By Pete Schroeder

WASHINGTON (Reuters) – U.S. banks reported Wednesday a slowdown in profits in the third quarter of the year, as lower noninterest income and higher realized losses on bank investments took a toll.

The U.S. Federal Deposit Insurance Corporation reported bank profits at $68.4 billion in the most recent quarter, down 3.4% from the prior quarter. Year over year, bank profits were down 4.6%, due in large part to banks setting aside more funds in provision expenses for potential loan losses, which were up 33.2% in the last four quarters.

Noninterest income was down $4.1 billion, or 5.2%, in the third quarter, while realized losses climbed $3 billion, the FDIC said.

The agency also reported that banks saw their unrealized losses on securities climb to $683.9 billion in the third quarter, a 22.5% jump driven primarily by rising mortgages rates that have reduced the value of mortgage-backed securities held by banks.

However, the agency noted that despite these challenges, banks remain well-capitalized, the rate of deposit flight has steadied, and the level of noncurrent loans held by banks remained below pre-pandemic levels.

“The banking industry continued to show resilience in the third quarter,” said FDIC Chairman Martin Gruenberg in a prepared statement.

Gruenberg, who typically holds a press conference following the release of the quarterly report on bank profits, was not made available to reporters Wednesday.

The release of the third-quarter report marked the FDIC’s first since the agency was embroiled in controversy over reports of sexual harassment and other inappropriate conduct. The FDIC’s board of directors announced a special committee to examine the claims, which include whether Gruenberg appropriately addressed issues that came to his attention. The FDIC Inspector General is also conducting an inquiry on the matter.

Gruenberg has faced multiple calls for his resignation from Republicans in Congress, as lawmakers have also announced their own probes into the matter.

Sen. Joni Ernst, a Republican from Iowa, sent a letter to Gruenberg Wednesday, demanding documents detailing to how the FDIC has handled inappropriate behavior at the agency in the past, including any legal settlements or non-disclosure agreements stemming from complaints.

“There must be serious consequences, including termination and criminal prosecution when warranted,” she wrote.

An FDIC spokesperson did not respond to a request for comment on the letter.

(Reporting by Pete Schroeder; Editing by Chizu Nomiyama)

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