FDIC Chair Martin Gruenberg said Thursday that the US banking industry "continues to face significant downside risks" from inflation and high interest rates, which could cause profitability and credit quality to weaken.
The decline of $98.6 billion, or 0.5%, "moderated substantially" from the $472 billion outflow during the first quarter, but it continued to place pressure on banks to raise their funding costs to keep account holders who are searching for higher yields. That, in turn, ate into a key measure of profitability.
The regulator, for example, did not add any more US banks to its so-called “problem” list, which numbers 43. Assets held by institutions on that list decreased by $10 billion to $43 billion.Banks on the FDIC's problem list typically have multiple weaknesses identified by regulators in confidential supervisory ratings. They can be seized and shut down unless the issues are resolved quickly.That list swelled into the hundreds during the industry's last big crisis which began in 2008.
But the concern within the industry is the direction of a more specific measure of bank profitability known as the net interest margin, which measures the difference between what lenders make from loans and pay for their deposits.