WASHINGTON, Aug 26 (Reuters) - The completed merger between Capital One and Discover Financial weighed down bank profits in the second quarter, as the sector reported $69.9 billion in profits, down 1% from the quarter prior.
The Federal Deposit Insurance Corporation said accounting rules required the merged institution to set aside a relatively large amount of provision expense. Absent that one-time cost, industry profits would have been up for the quarter on higher net interest and noninterest income, the regulator said.
The merged bank, which completed its deal in May, was the main contributor to a 33.7% increase in provision expenses for the quarter, which rose $7.6 billion. Bank profits were down $677.3 million for the quarter.
In a prepared statement, Acting FDIC Chairman Travis Hill noted that domestic deposits increased for the fourth straight quarter and loan growth accelerated. The FDIC said asset quality metrics for banks remained fairly good, but noted continued weakness in some portfolios, most notably commercial real estate and credit cards, which have overdue rates higher than the pre-pandemic average.
Reporting by Pete Schroeder; Editing by Chizu Nomiyama
Source: Reuters