U.S. bank profits declined 8.6% in the third quarter of 2024 to $65.4 billion, following a surge in the previous quarter fueled by one-time equity security gains, according to the Federal Deposit Insurance Corporation (FDIC). Despite the dip, profits remained above first-quarter levels, underscoring a degree of stability in the sector. Strong net interest income and revenue growth provided a counterbalance to declining profits, with FDIC Chairman Martin Gruenberg noting, "The banking industry continued to show resilience in the third quarter."
The report also highlighted rising concerns in the commercial real estate sector, where the ratio of past-due or nonaccrual loans increased to 2.07%, the highest level since 2013. Additionally, the FDIC's "problem bank" list grew to 68 institutions, with total assets in troubled banks jumping from $3.9 billion to $87.3 billion, signaling potential challenges ahead. These figures suggest growing stress among larger banks, even as the broader sector holds steady.
Market Overview:
- U.S. bank profits fell 8.6% to $65.4 billion in Q3 2024.
- Net interest income rose $4.5 billion during the quarter.
- Commercial real estate delinquencies reached 2.07%, a decade-high.
Key Points:
- FDIC's "problem bank" list expanded to 68 institutions.
- Total assets at troubled banks surged to $87.3 billion.
- Unrealized securities losses fell 29% as interest rates eased.
Looking Ahead:
- Banks face headwinds from high office vacancy rates post-pandemic.
- Stability expected to hinge on net interest margins and deposit growth.
- Analysts watching for larger bank impacts in Q4 earnings reports.
Banking stability was supported by a 1.1% rise in deposits to $194.6 billion, along with improved net interest margins across banks of all sizes. Unrealized losses on securities also dropped by 29%, aided by lower overall interest rates. These gains suggest that the industry is navigating a challenging landscape with a mix of resilience and caution.
However, the rise in problem banks and the growth of distressed assets indicate underlying vulnerabilities that could worsen if broader economic conditions deteriorate. With commercial real estate showing particular stress, analysts expect Q4 reports to offer clearer insights into the sector's health as banks adapt to persistent challenges.