By Pete Schroeder
WASHINGTON (Reuters) – U.S. banking sector profits rose 2.3% to $66.8 billion in the fourth quarter of 2024, a bank regulator reported on Tuesday, as it also announced moves to update how so-called problem banks are tracked.
In its latest quarterly report, the Federal Deposit Insurance Corporation said it is revising its “problem bank” list to say only how many banks have been downgraded by regulators. The FDIC will no longer disclose how many assets are held at those banks.
FDIC Acting Chairman Travis Hill said in a statement that the practice of disclosing how many assets are at problem banks, first established in 1990, has become problematic because the growth of large firms has made it “comparatively easier” to identify when a big bank is added to the list.
Hill said disclosing assets could spur a bank run if the public saw a large jump in total assets on the list and tried to determine which large firm was deemed problematic by watchdogs.
Bank supervisors may also be reluctant to downgrade a large bank, knowing the jump in total assets at problem banks could spark instability, Hill added.
The FDIC reported 66 problem banks in the fourth quarter, down from 68 the prior quarter.
Overall, the banking sector reported healthy numbers, posting a 5.6% increase in 2024 year-long profits to $268.2 billion.
The FDIC said the boost in fourth-quarter profits was mainly due to recent short-term interest rate cuts, which helped boost net interest income by $3.8 billion for banks, as interest expenses shrank more than interest income.
The amount of funds banks set aside for potential losses was also down, dipping 5.5% from the prior quarter to $22.3 billion.
Unrealized losses on securities held by banks jumped 32.5%, and now total $482.4 billion, the FDIC said. However, that level is only 1% higher than levels seen one year prior.
Domestic deposits were up 1.2% in the fourth quarter, led by a 3% jump in uninsured deposits, which now stand at $218.5 billion.
(Reporting by Pete Schroeder in Washington; Editing by Nia Williams)
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