US bank deposits fell at record pace in Q1 profits flat: FDIC
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2:57 PM UTC
Updated ago
Customers wait outside as an employee enters the Silicon Valley Bank branch office in downtown San Francisco, California, U.S., March 13, 2023. REUTERS/Kori Suzuki/File Photo
WASHINGTON, May 31 (Reuters) - U.S. banks saw total deposits decline by a record 2.5% in the first quarter of 2023, and industry-wide profits were relatively flat after taking into account the effects of two large bank failures, the Federal Deposit Insurance Corporation said Wednesday.
The FDIC said the $472 billion in deposit outflows in the first quarter was primarily uninsured funds, as insured deposits actually rose $255.1 billion, or 2.5%, amid the failures of Silicon Valley Bank and Signature Bank. The decline in deposits was offset by increased wholesale funding, which rose 14.4% in the first quarter.
Wednesday's report marks the most comprehensive view of the banking industry's health since those two failures helped set off wider turmoil across the sector, including the May seizure of First Republic Bank.
The FDIC said bank profits were technically up 16.9% to $79.8 billion in the first quarter of the year, but profit levels were effectively flat after taking into consideration the accounting impact of the acquisition of those two failed firms.
The results showed banks shrinking the amount of unrealized losses on their books and maintaining strong capital ratios. But it also found deposit outflows for the fourth straight quarter and accelerating, and the FDIC placed four new firms on its "problem bank list," which now includes 43 firms with a total of $58 billion in assets.
In prepared remarks, FDIC Chairman Martin Gruenberg said the industry has remained "quite resilient" amid the stress, but the fuller impact will not be seen until the agency reports second quarter results later this year.
Gruenberg noted that even flat profit levels are still high by historical standards, and was boosted by record trading revenue by large banks and strong growth in non-interest income.
Reporting by Pete Schroeder, Editing by Nick Zieminski
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Wednesday, May 31, 2023 at 2:57 pm