US regional banks hope for profit revival as pain from SVB fallout eases

Stay informed with free updates

Simply sign up to the US banks myFT Digest — delivered directly to your inbox.

US regional bank executives say the pressure to pay up to keep depositors from leaving, which cut profits last year, is easing, paving the way for better earnings after the collapse of Silicon Valley Bank hurt mid-sized lenders last year.

Tim Spence, chief executive at Fifth Third Bank, based in Cincinnati, Ohio, said the competition for deposits remained “robust,” but that banks were no longer having to offer customers such generous terms to keep their business.

“You still have to be competitive,” Spence told the Financial Times. “I just think you’re not fighting irrationality the way maybe we would have been before.”

Bruce Van Saun, chief of Rhode Island-based regional lender, Citizens Financial, said pressure on deposit costs had been slowing every quarter since the end of June. “You’re starting to see those pressures abate somewhat,” Van Saun said.

Nonetheless, profits at regional banks across the US, the biggest of which have reported their earnings during the past two weeks, continued to slump in the fourth quarter.

Profits at Fifth Third plunged nearly 30 per cent in the quarter compared with the same period a year ago, while profits at Citizens fell about 70 per cent.

The bottom lines at Comerica, based in Dallas, Texas, Zions Bank, based in Salt Lake City, Utah, and PNC in Pittsburgh, Pennsylvania, fell roughly 90 per cent, 55 per cent and 40 per cent, respectively.

Part of the reason for the profit drop was last year’s banking turmoil — the Federal Deposit Insurance Corporation imposed a one-time charge on many US banks in order to pay for losses, which the FDIC’s deposit insurance fund had to cover, from the bank failures last year.

The need to offer higher rates to keep deposits, which is the primary source of funding for banks, has remained a strain on the profit margins of smaller banks, even as larger lenders like…