Deposits fell at regional banks USB and CFG during 1Q turmoil

Deposits fell at US Bancorp ( USB ) and Citizens Financial Group ( CFG ) during the first quarter, providing new signs of how challenging the period was for some of the nation’s regional lenders.

At US Bancorp, a Minneapolis-based institution, deposits fell by nearly $20 billion from Dec. 31 to March 31. They fell by $8.5 billion at Citizens Financial Group, which is based in Providence, RI.

Several other regional banks are due to report first-quarter results in the coming days, including Zions ( ZION ) Wednesday and Truist ( TFC ) and Comerica ( CMA ) on Thursday. Investors will be watching to see if these institutions are challenged by deposit outflows, slimming margins or declining loan volumes.

Shares of US Bancorp were roughly flat in premarket trading while CFG was down more than 2%.

Shares of another regional bank, Western Alliance ( WAL ), rose more than 1[ads1]9% in premarket trading after an announcement Tuesday that deposits rose by $2 billion since the end of the first quarter. That reversed some of the $6 billion in deposit outflows that occurred during the first quarter. Western Alliance also said the percentage of deposits insured by the FDIC increased to 73%.

US Bancorp, which was the nation’s fifth-largest lender as of Dec. 31, said net income was $1.7 billion, up from $1.5 billion a year ago. Net income was $7.1 billion, up 27% from the same period last year. It has, like many banks, benefited from the rise in interest rates in the past year by demanding more for its loans. Net interest income, the difference between what it earns on loans and pays out in deposits, increased year on year.

Deposits ended the period at $505 billion, down from $524 billion. It said there were about $11 billion in outflows related to the December 2022 purchase of Mitsubishi UFJ Financial Group’s US banking business.

Citizens Financial, which was the 13th largest U.S. bank as of Dec. 31, said net income was down 7% from the year-ago quarter and 39% from the fourth quarter. Revenue fell 3% from the previous quarter, but rose 29%, or $483 million, from a year ago.

Profits and revenue also fell at Phoenix-based Western Alliance compared to the fourth quarter of 2022, although loans increased compared to the same period last year. It lost a total of $6 billion in deposits during the first quarter, a figure the company disclosed earlier this month as a way to reassure investors.

It also said earlier this month that the share of deposits covered by the Federal Deposit Insurance Corporation had reached 68% at the end of the first quarter; on Tuesday it said the figure had risen to 73% as of April 14. The FDIC insures up to a limit of $250,000 per account.

This means that Western Alliance is now less dependent on funding from depositors who are considered a greater flight risk in periods of uncertainty. Silicon Valley Bank was seized by regulators after depositors withdrew $42 billion in one day.

Net interest income increased by more than 35% from the same period last year. The concern now is that those margins could start to fall across the industry as banks begin to pay more aggressively for deposits and lure new customers with higher rates. And at Western Alliance, this measure fell more than 5% from the end of the fourth quarter.

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