Only Major US Banks Benefit from High Interest Rates... Big 4 Earn Half of Net Profit

Analysis of Q3 Reports from Each Bank
Big 4 Banks Account for 45% of Net Profit Among 4,400 US Banks
Significantly Exceeding 10-Year Average

[Image source=Reuters Yonhap News]

About half of the profits earned by U.S. banks in the third quarter of this year came from the four major banks. Despite growing concerns over the regional bank crisis and commercial real estate loan defaults in the U.S., there is an increasing recognition of the limitations of the "too big to fail" phenomenon, as only the profitability of large banks continues to rise.

On the 12th (local time), financial information firm BankRegData analyzed the quarterly reports submitted by each bank to the U.S. Federal Deposit Insurance Corporation (FDIC) and found that the net income of the four major U.S. banks increased by 23% compared to the same period last year. The four major banks refer to JP Morgan, Bank of America, Wells Fargo, and Citigroup. Notably, among the total 4,400 banks in the U.S., the four major banks accounted for 45% of the net income in the third quarter. This is a 10 percentage point increase from 35% in the same period last year and significantly exceeds the 10-year average of 39%.

During the same period, the net income of the remaining banks decreased by an average of 19%, marking the largest decline since the COVID-19 pandemic. This is analyzed as a result of increased loan interest rates due to rate hikes, but also higher costs for funding such as interest on time deposits. The annualized time deposit interest rate for the Big 4 banks in the third quarter was 2%, which is lower than the regional banks' average of 3%.

Alexander Yoakum, a regional bank analyst at CFRA, pointed out, "The decline in net interest margin (NIM) due to high interest rates was more pronounced in small and medium regional banks than in large banks." NIM refers to the operating income from financial institutions' total assets minus funding costs; a higher NIM indicates better interest profitability.

Customer attrition (sharp decline in deposits) is also continuing among banks other than the Big 4. A British foreign media outlet noted, "Due to economic uncertainties and other factors, market confidence in the 'too big to fail' myth has strengthened, leading to a concentration of credit in large banks."

The expansion of loan loss provisions due to concerns over commercial real estate defaults is also a factor in the declining performance of regional banks. Regional banks hold a very high share of 60-70% of all commercial real estate loans. Christopher Whelan, CEO of investment advisory firm Whelan Global Advisors, warned, "The pressure on earnings from commercial real estate loans will continue, and this quarter may not be the worst performance."

This content was produced with the assistance of AI translation services.