US Bank Profits Fall Following Slower Loan Loss Allowance Reduction | Invest News

(This story from November 30 corrects the long-term loan rate)

WASHINGTON (Reuters) – U.S. bank profits fell 1.2% in the third quarter of 2021 to $ 69.5 billion as companies were slower to reduce their provisions for credit losses and were struggling with low interest rates, the Federal Deposit Insurance Corporation reported on Tuesday.

Bank profits are still up nearly 36% from the same period a year ago, when banks were still rushing to set aside funds to guard against loan losses caused by the pandemic.

Banks have reduced these loan loss provisions for three consecutive quarters, but slowed the rate of decline in the third quarter, lowering it to $ 5.2 billion from $ 10.8 billion in the second quarter.

As banks continued to reduce these reserves, the rate on non-current loans for banks fell from 6.3% to 0.94%. The net cancellation rate on loans that are no longer due fell to 0.19%, the lowest level on record.

Total loan balances edged up, with two-thirds of all banks reporting annual profit growth. Almost 96% of the banks were profitable.

“With strong levels of capital and liquidity to support lending and protect against potential losses, the banking sector has continued to meet the country’s financial service needs while addressing the challenges presented by the pandemic,” the bank said. FDIC President Jelena McWilliams in a statement.

Banks’ net interest margin fell from a record low in the second quarter to 2.56% as banks reported a $ 5.2 billion increase in interest income, a slight increase from the quarter previous.

(Reporting by Pete Schroeder; Editing by Chizu Nomiyama and Edmund Blair)

Copyright 2021 Thomson Reuters.

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