(Reuters) – Regions Financial’s second-quarter profit met Wall Street estimates on Friday, as higher interest income offset the drag from bigger provisions.
Lenders have earned more in interest income, thanks to a sharp rise in interest rates by the U.S. Federal Reserve. But that has also raised the risks of loan defaults, prompting banks to set aside more rainy-day funds.
The Alabama-based company’s quarterly net interest income, the difference between the interest banks earn on loans and pay out on deposits, rose nearly 25% from a year earlier to $1.38 billion.
It set aside $118 million in provisions for credit losses in the quarter ended June 30, compared with $60 million a year earlier.
Deposits at banks have also come into focus in recent months after the collapse of three U.S. regional banks prompted the biggest bout of banking turmoil since the 2008 financial crisis.
Regions Financial’s total average deposits fell almost 3% sequentially as customers continue to chase higher yielding options for better returns. They declined 10% in the second quarter from a year earlier.
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The lender reported quarterly profit of 59 cents per share, in line with analysts’ average estimate, according to Refinitiv data.
(Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Shilpi Majumdar)