By Pete Schroeder
WASHINGTON (Reuters) – U.S. bank profits fell 6.5% in the first quarter of 2022 to $59.7 billion, as the biggest companies increased their loan loss provisions in response to heightened economic uncertainty. and geopolitics, the Federal Deposit Insurance Corporation (FDIC) reported on Tuesday.
Bank profits fell 22.2% compared to the first quarter of 2021, weighed down by banks with more than $10 billion in assets setting aside more funds to protect themselves from loan losses.
“Inflationary pressures, rising interest rates and geopolitical uncertainty could hamper banks’ profitability, weaken credit quality and reduce loan growth,” said Acting FDIC Chairman Martin Gruenberg. it’s a statement.
Bank profits had risen to record highs in early 2021 as the receding impact of the COVID-19 pandemic led to a resurgence in economic growth and allowed banks to draw down the huge loan loss reserves they had set aside. at the start of the pandemic.
However, profits have fallen as banks have been less aggressive in reducing those buffers, while some larger lenders are backing down and rebuilding them, further reducing profits.
In the first quarter of 2021, the industry cut loan-loss provisions by $14.5 billion, but started increasing them by $5.2 billion in the first quarter of this year.
That reserve growth was primarily driven by banks with more than $10 billion in assets, as only 25% of all banks reported higher provisions for loan losses, the FDIC said.
JPMorgan Chase & Co, Goldman Sachs Group Inc and Citigroup Inc combined, for example, set aside $3.36 billion in loan loss reserves in the first quarter of this year, the banks said.
However, loan balances grew another 1% in the first quarter, driven primarily by increases in commercial and industrial loans.
(Reporting by Pete Schroeder, Editing in Spanish by Ricardo Figueroa)