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Deposits dropped at regional banks USB and CFG during 1Q tumult

Some of the nation's largest regional banks offer new signs of how they fared during a chaotic period for the industry

Deposits dropped at US Bancorp (USB) and Citizens Financial Group (CFG) during the first quarter, offering new signs of how challenging the period was for some of the nation's regional lenders.

At US Bancorp, a Minneapolis-based institution, deposits fell by nearly $20 billion from Dec. 31 to March 31. They dipped by $8.5 billion at Citizens Financial Group, which is based in Providence, RI.

Several other regional banks are due to report first-quarter results in the coming days, including Zions (ZION) Wednesday and Truist (TFC) and Comerica (CMA) on Thursday. Investors will be watching to see whether these institutions are being challenged by deposit outflows, slimming margins or slowing loan volumes.

The stock of US Bancorp was up more than 2% Wednesday while CFG was flat.

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The stock of another regional bank, Western Alliance (WAL), surged more than 17% in morning trading following a Tuesday announcement that its deposits rose by $2 billion since the end of the first quarter. That reversed some of its deposit outflow of $6 billion that happened during the first quarter. Western Alliance also said its percentage of deposits insured by the FDIC increased to 73%.

US Bancorp, which was the nation's fifth-largest lender as of Dec. 31, said its net income was $1.7 billion, up from $1.5 billion a year ago. Its net revenues were $7.1 billion, up 27% from the year-ago period. It has, like many banks, benefited from the rise in interest rates over the last year by charging more for its loans. Its net interest income, the difference between what it earns on loans and pays out in deposits, surged year over year.

Its deposits ended the period at $505 billion, down from $524 billion. It said there were roughly $11 billion in outflows related to its December 2022 purchase of Mitsubishi UFJ Financial Group's US banking business.

Citizens Financial, which was the 13th-largest US bank as of Dec. 31, said its net income was down 7% from the year-ago quarter and 39% from the fourth quarter. Revenue fell 3% from the previous quarter but rose 29%, or $483 million, from a year ago.

Profits and revenue also fell at Phoenix-based Western Alliance fell when compared to the fourth quarter of 2022, although loans were up when compared to the year-earlier period. It lost a total of $6 billion in deposits during the first quarter, a figure the company disclosed earlier this month as a way of reassuring investors.

It also said earlier in the month that its percentage of deposits covered by the Federal Deposit Insurance Corporation had reached 68% at the end of the first quarter; on Tuesday it said that figure had risen to 73% as of April 14. The FDIC insures up to a limit of $250,000 per account.

What that means is Western Alliance is now less dependent on funding from depositors who are considered a greater flight risk during periods of uncertainty. Silicon Valley Bank was seized by regulators after its depositors pulled $42 billion in one day.

Its net interest income jumped more than 35% from the year-earlier period. The concern now is that those margins could begin to fall across the industry as banks begin to pay more aggressively for deposits and lure new customers with higher rates. And at Western Alliance, this measure dropped more than 5% from the end of the fourth quarter.

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