July 19 (Reuters) – Major U.S regional banks said their deposits mostly stabilized and net interest income rose after the first-quarter collapse of Silicon Valley Bank sparked industry turmoil, sending their shares soaring on Wednesday.
Three major U.S. regional banks met or beat profit expectations as higher interest rates allowed them to charge more for loans.
M&T Bank’s deposits rose to $162.1 billion from $159.1 billion at the end of the first quarter, but fell about 4.9% year-on-year.
M&T Chief Financial Officer Daryl N. Bible said on an analyst call on Wednesday he expected a modest uptick in deposits in the second half of the year as business activity picks up.
US Bancorp said average deposits totaled $497.27 billion, down 2.6% from the end of the first quarter, but up 9% on the year. At Citizens, deposits fell less than 1% over the same period to $173.2 billion. First Horizon’s (.FHN) deposits increased 6% quarter-on-quarter.
In the first quarter, Silicon Valley Bank and two other lenders collapsed after deposit runs, prompting panicked consumers to move their money from small banks to bigger institutions. The exodus has forced some banks to offer higher returns.
While the intense first-quarter withdrawals seem to be over, some executives noted the uptick in deposits was partly seasonal and warned of possible outflows. But overall the picture was positive.
“There have been no more failures for a while and none appear imminent,” Citizens Financial Group CEO Bruce Van Saun said in an interview. “And then the Fed looks like it could be done with interest rate hikes and getting to a pause. And I think both things have been positive for the deposit picture.”
Discover Financial (DFS.N) said it was pausing its share repurchases pending an internal review of compliance, risk management and corporate governance, sending its shares down around 12% in after-market trading.
M&T’s shares finished up 2.48%, Citizens and US Bancorp both closed around 6.4% higher, while Zions Bancorp (ZION.O) rose 8% in extended trading. First Horizon shares were flat.
Zions, reporting earnings after the market close, said customer deposits rebounded $2 billion, or 3.2%, over the past three months, but the higher cost of funds weighed on its net interest income, or difference between what banks earn on loans and pay out on deposits.
“The expectation going into the quarter was very low and results have not been as bad,” KBW analyst Christopher McGratty said. “The banks have shown that they are in a position to get back the deposits but going ahead the focus will also be on seeing at what costs are they able to accumulate it.”
M&T said NII surged 27% from the year-ago quarter to $1.81 billion, while Citizens said its NII increased 5.5% to $1.59 billion. At US Bancorp (USB.N), NII rose about 28%.
Big U.S. banks on Tuesday likewise said higher interest rates had helped boost second-quarter profits, lifting their shares, but a pullback in consumer spending, slower loan growth and increased deposit costs may cloud the sector outlook.
Truist Financial (TFC.N), KeyCorp (KEY.N) and Fifth Third Bancorp (FITB.O) report on Thursday.
Writing by Michelle Price and Nupur Anand; reporting by Manya Saini, Jaiveer Singh Shekhawat, Johann Cherian and Bansari Mayur Kamdar in Bengaluru, and Chibuike Oguh, Saeed Azhar and Lance Tupper in New York;
Editing by Nick Zieminski and Richard Chang
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