Wrapup 1: U.S regional bank shares rise on interest income, deposits stabilizing

Citizens & Northern

19/07/2023 16:48

July 19 (Reuters) - Three major U.S. regional banks met
or beat profit expectations on Wednesday as higher interest
rates allowed them to charge more for loans, while deposits
stabilized, sending shares across the sector up.
    Investors have been anxiously awaiting regional bank second
quarter earnings as they look for reassurance that the turmoil
that rocked the sector earlier this year has finally passed.  
    M&T Bank Corporation  MTB.N  and Citizens Financial Group
 CFG.N  both beat Wall Street estimates from charging clients
higher interest rates after the U.S. Federal Reserve raised
borrowing costs to rein in stubborn inflation. 
    M&T said net interest income (NII), which measures the
difference between what banks earn on loans and pay out on
deposits, surged 27% to $1.81 billion on the same quarter last
year, while Citizens said its NII increased 5.5% to $1.59
billion. At US Bancorp  USB.N , NII was up around 28%. 
    Big U.S. banks on Tuesday likewise said higher interest
rates had helped boost second quarter profits, causing shares to
spike, but a pullback in consumer spending, slower loan growth
and increased deposit costs may cloud the sector outlook. 
    That sentiment was underscored by USB, which warned on
Wednesday that now it now expects full-year NII to be between
$17.5 billion and $18.0 billion, falling short of average
analyst estimates of $18.1 billion, according to Refinitiv data.
    M&T shares were up 2.6% and Citizens added 4.55% in morning
trading, while US Bancorp was up 3%. The KBW Regional Bank Index
 .KRX  and S&P regional bank index  .SPCOMBNKS  were each
gaining nearly 2% in line with the broader market. 
    Zions Bancorp  ZION.O  reports later on Wednesday, while
Truist Financial  TFC.N , KeyCorp  KEY.N  and Fifth Third
Bancorp  FITB.O  report on Thursday.  
     The results follow a tumultuous first quarter in which
Silicon Valley Bank and two other lenders collapsed after
deposit runs, leading panicked consumers to yank deposits from
small banks and place them with bigger Wall Street players. That
has forced some banks to offer consumers higher returns.
    "For the regionals, the thought process was they were going
to be pretty weak and they haven't been so far," said Dennis
Dick, market structure analyst at Triple D Trading. 
    "After everything that we saw happening in the regional
banking crisis a couple months ago, there were concerns about a
lot of withdrawals, but I would say it has been better than
expectations." 
    M&T's deposits rose to $162.1 billion from $159.1 billion at
the end of the first quarter, but fell about 4.9% year-on-year.
US Bancorp said total average deposits were at $497.27 billion,
down 2.6% sequentially but up 9% on the year. At Citizens,
deposits fell less than 1% sequentially to $173.2 billion. 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
US bank shares jump on interest income and deals optimism, but
outlook mixed     urn:newsml:reuters.com:*:nL4N3943ED
BofA profit surges on interest income, surprise investment
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U.S. banks point to resilient but slowing economy, flag risks
ahead     urn:newsml:reuters.com:*:nL1N39005S
Citigroup profit drops 36% on trading slump, rising expenses   
 urn:newsml:reuters.com:*:nL4N390330
JPMorgan's profit surges to record after First Republic deal   
 urn:newsml:reuters.com:*:nL4N3902QL
Wells Fargo hikes outlook for interest income after profit
surges 57%     urn:newsml:reuters.com:*:nL4N3902Q8
State Street beats profit estimates as interest income rises    
 urn:newsml:reuters.com:*:nL4N390344
Healthy US consumers shrug off recession concerns, for now   
 urn:newsml:reuters.com:*:nL4N3940OP
Schwab's profit drops less than expected on asset management
strength     urn:newsml:reuters.com:*:nL4N3943KM
BREAKINGVIEWS-Banks peer at fun-house mirror version of normal  
  urn:newsml:reuters.com:*:nL4N39437Y
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 (Writing by Michelle Price; reporting by Manya Saini, Jaiveer
Singh Shekhawat, Johann Cherian and Bansari Mayur Kamdar in
Bengaluru, and Chibuike Oguh in New York
Editing by Nick Zieminski)
 ((michelle.price@thomsonreuters.com; +12026041711; Twitter:
@michelleprice36;))