FirstFT: US banks make record $80bn in first-quarter profits despite turmoil

The most significant stress since the 2008 financial crisis did not damp US banking profits, which climbed 33 per cent from a year ago to reach an all-time high of roughly $80bn in the first quarter.

The turmoil was in large part responsible for the bumper haul. About half of the increase in the industry’s aggregate profits came from one-time gains recorded by First Citizens and Flagstar, which bought the remnants of Silicon Valley Bank and Signature Bank, respectively, after they were seized by regulators and sold off at a discount in March.

Even so, the jump in profits also showed US banks in general benefited from rising interest rates, low loan defaults and an expanding job market despite nervousness among depositors and investors.

Of the nation’s nearly 4,400 banks, just 197 — or less than 5 per cent — made losses in the first quarter, according to BankRegData, which collates quarterly reports made by lenders to the Federal Deposit Insurance Corporation.

Here are two opinion pieces I recommend on what comes next for the banking sector.

• Preventing turmoil: While conditions have stabilised, more must be done to stop a third phase of bank tremors, writes Mohamed El-Erian.

• Congress must act: The US needs to reinstate measures that shielded operational business accounts during the pandemic to protect smaller banks, writes Sheila Bair, former chair of the US Federal Deposit Insurance Corporation.

And here’s what else I’m keeping tabs on today:

• Nato meeting: Defence chiefs meet in Brussels to discuss Russia’s war in Ukraine.

• Google: The tech giant holds its annual I/O conference in California, where chief executive Sundar Pichai is due to speak.

• Results: ABN Amro, Ahold Delhaize, Alstom, Asos, Compass Group, Continental AG, Crédit Agricole, Disney, Eon, Ferroglobe, The New York Times Company and Tui report.

• Economic data: The US and Germany have consumer price indices for last month, while KPMG and REC release their jobs report for the UK.

Five more top stories

1. Exclusive: Uber has launched flight bookings in its UK app, allowing customers to book a complete journey across multiple forms of transport. Read more on the ride-booking giant’s push to become a travel “super app”.

2. US president Joe Biden has urged Republicans to “take the threat of default off the table” after his first big meeting with congressional leaders on the debt ceiling failed to reach a breakthrough. Party leaders are due to meet Biden again on Friday. Here’s what could happen if the US defaults on its debt.

3. COP28 has hired a former aide to Boris Johnson who opposed a tax on oil and gas companies. The decision to take on rightwing strategist David Canzini, who advised the UK prime minister in his last few months in office, has prompted concern among environmentalists.

4. A Saudi Arabia state-backed group is looking at launching an English-language news channel that could rival Qatar’s Al Jazeera. Read more on the kingdom’s plans to expand its global media influence.

5. Donald Trump has been found liable for the sexual abuse of a journalist in a Manhattan department store in the 1990s, in a significant legal defeat for the former US president as he mounts a third bid for the White House. The jury awarded plaintiff E Jean Carroll, a former advice columnist and TV presenter, a total of $5mn in damages.

The Big Read

Russia’s rough diamond exports were worth $4bn in 2021, only a fraction of its crude oil exports. But every available revenue source is important to Moscow’s treasury as it bankrolls its invasion of Ukraine. This month, G7 officials are expected to target the sale of Russian diamonds in their nations in a bid to squeeze Moscow’s access to finance and — they hope — impede the Kremlin’s ability to wage war.

We’re also reading . . . 

• Executive pay: With chief executives in the US making a median $13.4mn compared with $5.5mn in the UK, does it pay for British executives to move across the pond?

• War tech: The invasion of Ukraine has sped up disruption from innovative military technologies such as sensors, robotics and unmanned systems.

• Sudan and China: The African nation’s conflict has dealt a blow to Beijing’s lending strategy with the continent, putting at further risk loans worth at least $5bn.

Chart of the day

In 1900, the UK had 3.3mn horses to provide pulling power, transport and cavalry. Now, they are an outmoded technology. With the rise of artificial intelligence, Martin Wolf asks if the same fate awaits humans.

Take a break from the news

In the central African rainforest, forest elephants emerge from the jungle to congregate in greater numbers than anywhere else on earth. Don’t miss Financial Times Africa editor David Pilling’s reflection on a one-of-a-kind journey to Sangha Lodge, a jungle sanctuary.

Additional contributions by Gordon Smith and Emily Goldberg