21 July (Reuters) – Regions Financial’s second-quarter earnings beat Wall Street expectations on Friday as higher interest income offset a drag from higher provisions.
Lenders are earning more in interest income thanks to a sharp increase in interest rates by the US Federal Reserve. But it also increases the risk of loan defaults, prompting banks to hold more cash just in case.
The Alabama-based company’s quarterly net interest income — the difference between what banks earn on loans and what they pay on deposits — rose about 25% year-over-year to $1.38 billion.
In the quarter ended June 30, the company set aside $118 million for credit losses, compared with $60 million in the same period last year.
Bank deposits have also been in the spotlight in recent months after the failures of three local U.S. banks sparked the biggest banking turmoil since the 2008 financial crisis.
Regions Financial’s average total deposits fell nearly 3% quarter-on-quarter as clients continue to chase higher-yield options for better returns. It fell 10% in the second quarter compared to the same period last year.
The financier reported a quarterly profit of 59 cents a share, consistent with average analyst expectations, according to Refinitiv data.
(Reporting by Jaiveer Singh Shekhawat in Bangalore; Editing by Sirpi Majumudar)