FDIC watching banks' balance sheets: Gruenberg

The Federal Deposit Insurance Corp. is paying closer attention to banks’ balance sheets after rising interest rates led to higher levels of unrealized losses in securities portfolios. 

While the banking industry has “high liquid asset levels,” Martin Gruenberg, the FDIC’s acting chairman, said in a Tuesday press release that “elevated levels of unrealized losses could increase the risk of actual losses should banks sell investments at a loss to meet liquidity needs in the future.”

Higher rates could also cut into real estate values and make it harder for some borrowers to repay their loans, Gruenberg noted in the release, which is tied to the FDIC’s Quarterly Banking Profile. 

“We’re particularly focused on commercial real estate and other assets that are being held on the books of the banks,” he said. 

Industry profits fell by 22.2% in the first quarter from a year earlier, to about $59.7 billion. The FDIC said nearly two-thirds of banks reported a year-over-year decrease in quarterly net income.

The aggregate loan-loss provision swung to a $5.2 billion build in the first quarter from a $14.5 billion release a year earlier. Total net chargeoffs fell by 32% from a year earlier, to $6.3 billion.

Total loans increased by 4.9% from a year earlier, to $11.2 trillion, led by an 11% rise in consumer loans. Deposits rose by 6.3%, to $20 trillion.

The FDIC said that 44 institutions merged during the first quarter.