The Federal Deposit Insurance Corporation (FDIC) has reported an increase in the number of US banks facing major issues. In the Second Quarter 2024 Quarterly Banking Profile, the agency revealed that the number of lenders on its “Problem Bank List” has risen from 63 to 66.
This marks the fifth consecutive quarterly increase of banks rated 4 or 5 on the CAMELS ratings system since the second quarter of 2023. A rating of 4 indicates that a bank is experiencing financial, operational, or managerial issues that could threaten viability if not resolved, while a rating of 5 signifies critical deficiencies requiring immediate attention.
According to FDIC Chairman Martin Gruenberg, the number of problem banks represents 1.5% of total banks, which falls within the normal range for non-crisis periods. These banks hold a total of $83.4 billion in assets, reflecting an increase of $1.3 billion.
On another note, US banks are grappling with unrealized losses on securities, totaling $512.9 billion in the second quarter. Despite a 0.7% decrease from the previous quarter, concerns persist. Gruenberg attributed this to modest interest rate increases affecting bond prices, offset by substantial realized losses from bond sales by large banks.
Gruenberg emphasized the resilience of the US banking industry but highlighted ongoing risks. Economic uncertainty, market interest rates, and geopolitical events pose significant downside risks, potentially leading to credit quality, earnings, and liquidity challenges. Weakness in specific loan portfolios like office properties, credit cards, and multifamily loans require monitoring, alongside funding and margin pressures.
Looking ahead, the FDIC will maintain supervisory attention on these issues. It is crucial for the industry to navigate these challenges effectively. Stay informed by subscribing to email alerts and following updates on The Daily Hodl’s platforms.
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