US Bank Profits Drop as Industry Slows Reductions in Credit Loss Provisions: FDIC

By Reuters
September 8, 2021 Updated: September 8, 2021

WASHINGTON—U.S. bank profits fell 8.3 percent to $70.4 billion in the second quarter of 2021 as firms slowed their reductions in credit loss provisions, the Federal Deposit Insurance Corporation reported on Wednesday.

While profits were still significantly higher than they were a year ago—up 281 percent from the second quarter of 2020—banks slowed the rate at which they shrank the large cushions they built up at the height of the coronavirus pandemic.

In the second quarter, banks upped their credit loss provisions by $3.7 billion, but those provisions are still down significantly from a year ago, declining $73 billion, or 117.3 percent. Just 14 percent of banks reported actually increasing their loss provisions in the last quarter.

Over the last year, the share of profitable banks rose slightly to 95.8 percent.

The regulator also reported that average net interest margin for banks hit a new record low of 2.5 percent.

Loan balances actually grew slightly for the first time since the second quarter of 2020 on the back of stronger borrowing for cars and credit cards. Noncurrent loans were down 10.8 percent from the first quarter, led by a decline in noncurrent residential loans, which dropped 10.9 percent.

By Pete Schroeder