4 out of 4,400 banks accounted for about half of the profits of the banking sector in America during the third quarter of 2023.
According to BankRegData data, the profits of JPMorgan, Bank of America, Wells Fargo and Citibank increased by 23%, accounting for 45% of the sector’s total profits in the third quarter of the year, compared to 35% a year ago, and higher than the 10-year average (39%).
On the other hand, the profits of all other institutions fell by 19% on average during the same quarter, representing their largest decline since the first months of the corona pandemic, according to a report published by the British Financial Times, pointing out that “the era of high interest rates offers an advantage to the largest financial institutions in America, at the expense of smaller competitors.
The US banking sector’s profits fell by 5% in the third quarter, a decline due to losses in lending and bond market investments, as well as a 260% increase in interest costs (what banks have to pay depositors to prevent them from looking for a better deal elsewhere), according to BankRegData data.
This decrease compares to a 10% increase in profits during the second quarter of the year. It represents the first decline in total industry profits in six quarters.
Despite this,” this quarter was not bad, but earnings will continue to squeeze, ” the newspaper quotes veteran banking analyst and head of Whalen Global Advisors, Christopher Whalen.
While the sector’s overall profits declined, profits rose at the four largest U.S. banks, the only banks in the country with assets of more than a trillion dollars each.
According to Alexander ukom, from CFRA financial analytics and Research, ” small banks are more exposed to commercial real estate, specifically offices, which is one of the biggest areas of lending concern, and therefore they had to hold a larger percentage of their loans to cover potential losses.
But the biggest reason for this gap between banks is the fact that the big banks, probably due to technological advantages or perceived security due to their size, did not have to pay the same amount of money to retain depositors.
