Higher expenses weigh down U.S. bank profits in 2022 - FDIC

By Pete Schroeder

WASHINGTON (Reuters) -U.S. banks reported a 5.8% decline in profits in 2022 as firms spent more on noninterest items and provision expenses against future losses, the Federal Deposit Insurance Corporation reported Tuesday.

Bank profits dropped 4.6% in the last quarter of 2022, but overall profits remain above average profits seen by the sector before the pandemic, the bank regulator said.

"Key banking industry metrics remain favorable at this time," said FDIC Chairman Martin Gruenberg in a statement. "However, the banking industry continues to face significant downside risks from inflation, rising market interest rates, and geopolitical uncertainty."

The FDIC said the higher spending on noninterest items and provision expenses, particularly at larger firms, were behind the slowdown in industry profits.

There were some signs of weakening credit quality, as early-stage delinquencies, noncurrent loans and charge offs for auto and credit card loans were all up slightly. But the sector overall appeared strong, as the FDIC's "problem bank list" fell to 39 firms, the lowest level the agency had ever recorded.

(Reporting by Pete Schroeder; Editing by Andrea Ricci)