Wrapup 1: US banks see high deposit costs, investment banking boost

First Horizon

17/07/2024 15:48

July 17 (Reuters) - U.S. lenders' second-quarter profits
were squeezed by dampening loan demand and the high interest
they paid to hold on to deposits, but a flurry of bond sales
boosted their investment banking units. 
    Citizens Financial  CFG.N , US Bancorp  USB.N , First
Horizon  FHN.N  and Synchrony Financial  SYF.N  all paid higher
rates compared with a year earlier on their customers' deposits,
they said on Wednesday. 
    The results illustrate the pressure on banks from the
Federal Reserve's quantitative tightening that has pushed the
benchmark interest rate to its highest since the global
financial crisis in 2008.   
    However, Wall Street operations were a bright spot.
Citizens' capital market fees surged 63%, on the back of bond
underwriting and loan syndication.
    A resilient U.S. economy has encouraged corporate executives
to raise capital via bond sales, boosting the fees at investment
banks that underwrite such deals.
    Even at large banks such as JPMorgan Chase  JPM.N ,
Citigroup  C.N  and Bank of America  BAC.N , the investment
banking business was lucrative in the second quarter. 
    The KBW regional banking index  .KRX  hit its highest in
over a year and was last up nearly 2%, while the S&P 500 banks
index  .SPXBK  inched up 0.4%.
    
    CRE IN FOCUS
    Banks have been facing tough scrutiny from investors over a
potential weakness in their commercial real estate loan
portfolio. 
    Problems tied to CRE loans at regional lender New York
Community Bancorp  NYCB.N  and more recently First Foundation
 FFWM.N  have put the spotlight on default risks.
    The Federal Reserve's stress test also showed that banks'
credit card loans and corporate credit portfolios could be
tricky.
    Lenders hold a larger share of non-investment grade
corporate credit, which are over three times more likely to
default than investment grade ones, the Fed said.
    On a brighter note, Washington Federal  WAFD.O  reported
better-than-expected third-quarter earnings on Tuesday, nearly a
month after it sold $2.8 billion of multi-family loans at no
loss. 

 (Reporting by Niket Nishant in Bengaluru; Editing by Krishna
Chandra Eluri)
 ((Niket.Nishant@thomsonreuters.com;))