Number Of 'Problem Banks' Climbs In 1st Quarter, New FDIC Report Finds

 by Andrew Moran via The Epoch Times,

It has been more than a year since the regional banking crisis exposed vulnerabilities in the financial system. A new Federal Deposit Insurance Corporation (FDIC) report discovered that the banking sector is still grappling with ballooning unrealized losses, a high number of “problem” banks, and various challenges that could worsen from high inflation and interest rates.

The U.S. financial regulator released the findings of the “FDIC Quarterly Banking Profile First Quarter 2024” report on May 29. Officials confirmed that unrealized losses on available-for-sale and held-to-maturity securities rose by $39 billion to $517 billion. This, the report noted, represented the ninth consecutive quarter of “unusually high unrealized losses” since the Federal Reserve started raising interest rates in March 2022.

An increase in unrealized losses on residential mortgage-backed securities accounted for most of the January-March jump.

The FDIC report further revealed that the number of problem banks totaled 63 in the first quarter, up from 52 in the fourth quarter of 2023. They represented 1.4 percent of total U.S. banks, “which was within the normal range for non-crisis periods of one or two percent of all banks.”

These banks appeared on the “Problem Bank List” because they contained a CAMELS (Capital adequacy, Assets, Management capability, Earnings, Liquidity, Sensitivity) composite rating of “4” or “5.”

CAMELS is the FDIC’s 1-5 rating system, which assesses a financial institution’s performance, risk management practices, and degree of supervisory concern.

Despite the banking system’s “resilience” in the first three months of 2024, the FDIC warned that the finance industry “still faces significant downside risks” from high inflation, geopolitical uncertainty, and volatility in market interest rates.

“These issues could cause credit quality, earnings, and liquidity challenges for the industry,” the report stated. “In addition, deterioration in certain loan portfolios, particularly office properties and credit card loans, continues to warrant monitoring.”

More Turbulence Ahead, Experts Warn

U.S. officials, be it at the Federal Reserve or the Treasury Department, have repeatedly assured the public that the banking system is safe, sound, resilient, and highly liquid.

However, a wave of reports suggests that there could be more turbulence ahead, especially concerning commercial real estate (CRE).

New data analysis from Florida Atlantic University discovered that 67 U.S. banks are at a high risk of failure due to their exposure to CRE.

The more than five dozen entities possess exposure to CRE greater than 300 percent of their total equity, the study found.

“This is a very serious development for our banking system as commercial real estate loans are repricing in a high interest-rate environment,” said Rebel Cole, Ph.D., a Lynn Eminent Scholar Chaired Professor of Finance at Florida Atlantic University’s College of Business.

“With commercial properties selling at serious discounts in the current market, banks eventually are going to be forced by regulators to write down those exposures.”

Another study found that large U.S. banks might have more CRE exposure than financial regulators think because of credit lines and term loans given to real estate investment trusts (REITs).

Commercial real estate properties sit on the market in Costa Mesa, Calif., on April 9, 2021. (John Fredricks/The Epoch Times)

Researchers, including former Reserve Bank of India’s deputy governor, Viral Acharya, purported that big banks’ CRE lending exposure balloons by approximately 40 percent when indirect lending to REITs is factored in.

In February, the Mortgage Bankers Association (MBA) projected that 20 percent, or $929 billion, of the $4.7 trillion outstanding commercial mortgages held by investors and lenders will mature this year. This is a 28 percent increase from the $729 billion that matured in 2023.

“The lack of transactions and other activity last year, coupled with built-in extension options and lender and servicer flexibility, has meant that many loans that were set to mature in 2023 have been extended or otherwise modified and will now mature in 2024, 2026, 2028 or in other coming years,” Jamie Woodwell, head of commercial real estate research at MBA, said. “These extensions and modifications have pushed the amount of CRE mortgages maturing this year from $659 billion to $929 billion.”

Fitch Ratings analysts asserted in March that “current trends in office property values suggest further declines” that mirror what occurred during the global financial crisis.

The Federal Reserve’s Bank Term Funding Program, an emergency lending facility for financial institutions facing fiscal pressures launched in the fallout of the regional banking meltdown, expired in March.

State of Deposits

While total commercial bank deposits are still below the April 2022 all-time high of $18.2 trillion, they have been steadily climbing since the Silicon Valley Bank and Signature Bank failures, totaling roughly $17.6 trillion.

Deposits at large commercial banks were $10.84 trillion in April 2023. By comparison, deposits at small domestic chartered commercial banks are at a record high of $5.402 trillion.

In recent years, there has been a notable trend of deposit concentration as the five biggest banks control about one-third of all U.S. deposits. JPMorgan Chase leads the industry.

According to a Securities and Exchange Commission (SEC) filing, the bank has roughly 14 percent of all U.S. deposits, totaling $2.4 trillion.

The total number of FDIC-insured commercial banks has been steadily declining since the 1984 peak of 14,469.

In 2023, FDIC data show there were 4,036 banks as more institutions have merged over the years.

https://www.zerohedge.com/markets/number-problem-banks-climbs-1st-quarter-new-fdic-report-finds

Merchant Ship Off Saudi Coast Reports "Significant Explosion" "Short Distance" From Port Side

 UK Maritime Trade Operations (UKMTO) reports a commercial vessel experienced a "significant explosion ... a short distance from the port side of the vessel." The incident occurred 50 nautical miles southwest of Al Shuqaiq, Saudi Arabia, in the southern Red Sea. 

"On inspection, no damage was found, vessel and crew are reported safe and is continuing to its next port of call," UKMTO wrote in an advisory on X. 

Bloomberg said, "There was no immediate claim for the blast but Houthi fighters based in Yemen have carried out multiple attacks on vessels in the Red Sea and have escalated such incidents since the Israel-Hamas war broke out last October." 

The Houthi's latest attack was on a bulk carrier last week near the Bab al-Mandab Strait. Also, the Houthis have downed six US MQ-9 Reaper drones.

The ongoing chaos in the Red Sea comes as the Iranian-backed terror group vowed it will continue its operations until the war in Gaza is brought to an end. 

One significant consequence of turmoil in the region is soaring containerized freight costs as capacity is stretched thin worldwide. A.P. Moller-Maersk A/S warned about this on Tuesday.

*Developing... 

https://www.zerohedge.com/commodities/merchant-ship-near-saudi-arabia-reports-significant-explosion-its-port-side

'Former Meta engineer sues company saying he was fired over handling of Gaza content'

 A former Meta engineer on Tuesday accused the company of bias in its handling of content related to the war in Gaza, claiming in a lawsuit that Meta fired him for trying to help fix bugs causing the suppression of Palestinian Instagram posts.

Ferras Hamad, a Palestinian-American engineer who had been on Meta's machine learning team since 2021, sued the social media giant in a California state court for discrimination, wrongful termination and other wrongdoing over his February dismissal.

In the complaint, Hamad accused Meta of a pattern of bias against Palestinians, saying the company deleted internal employee communications that mentioned the deaths of their relatives in Gaza and conducted investigations into their use of the Palestinian flag emoji.

The company launched no such investigations for employees posting Israeli or Ukrainian flag emojis in similar contexts, according to the lawsuit.

Meta did not immediately respond to a Reuters request for comment on Hamad's allegations.

Hamad's claims reflect long-standing criticisms by human rights groups over Meta's performance moderating the content posted to its platforms about Israel and the Palestinian territories, including in an external investigation the company commissioned in 2021.

Conflict erupted in Gaza after Hamas militants attacked inside Israel on Oct. 7, killing 1,200 people and taking over 250 people hostage according to Israeli tallies. Israel in response launched an offensive in Gaza that has killed more then 36,000 people, according to Gaza health officials, and triggered a humanitarian crisis.

Since the outbreak of war last year, the company has faced accusations that it was suppressing expressions of support for Palestinians living amid the war.

Nearly 200 Meta employees raised similar concerns in an open letter to Chief Executive Mark Zuckerberg and other leaders earlier this year.

Hamad said his firing appeared to stem from an incident in December involving an emergency procedure designed to troubleshoot severe problems with the company's platforms, known within Meta as a SEV or "site event".

He had noted procedural irregularities in the handling of an SEV related to restrictions on content posted by Palestinian Instagram personalities that prevented the posts from appearing in searches and feeds, the complaint said.

In one case, the complaint alleged, he found that a short video posted by Palestinian photojournalist Motaz Azaiza had been misclassified as pornographic even though it showed a destroyed building in Gaza.

Hamad said he received conflicting guidance from other employees about the status of the SEV and whether he was authorized to help resolve it, though he had worked on similarly sensitive SEVs before, including ones related to Israel, Gaza and Ukraine. His manager later confirmed in writing that the SEV was part of his job function, he said.

The next month, after a Meta representative told him he was the subject of an investigation, Hamad filed an internal discrimination complaint and days later was fired, he said.

Hamad said Meta told him he was fired for violating a policy barring employees from working on issues with accounts of people they know personally, referring to Azaiza, the photojouralist. Hamad said he had no personal connection to Azaiza.

https://www.yahoo.com/news/exclusive-former-meta-engineer-sues-035046716.html

Bank of Canada Cuts Rates By 25bps As Expected, First G7 Central Bank To Launch Easing Cycle

 As widely expected after significant dovish commentary in recent months, moments ago the Bank of Canada cut rates by 25bps from 5.00% to 4.75% as a majority of economists expected, and signaled that it is "reasonable to expect further cuts" if inflation eases.

The 25bps cut, which comes just under a year since its last 25bps rate hike in July 2023, means that Canada is the first G7-member central bank to launch an easing cycle.

In the drafted opening remarks of Governor Tiff Macklem wrote that: "If inflation continues to ease, and our confidence that inflation is headed sustainably to the 2% target continues to increase, it is reasonable to expect further cuts to our policy interest rate. But we are taking our interest rate decisions one meeting at a time."

Here is the balance of his commentary:

• "Further progress in bringing down inflation is likely to be uneven and risks remain."
• "If inflation continues to ease, and our confidence that inflation is headed sustainably to the 2% target continues to increase, it is reasonable to expect further cuts to our policy interest rate."
• "But total consumer price index (CPI) inflation has declined consistently over the course of this year, and indicators of underlying inflation increasingly point to a sustained easing" "Inflation could be higher if global tensions escalate, if house prices in Canada rise faster than expected, or if wage growth remains high relative to productivity."
• "With the economy in excess supply, there is room for growth even as inflation continues to recede."
• "Although Q1 growth was weaken than bank forecast, consumption growth was solid while business investment and housing activity also increased."

Taking a closer look at the BOC statement we find the following highlights:

• With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points.
• Recent data has increased our confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain. Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.
• The Bank remains resolute in its commitment to restoring price stability for Canadians.
• Three month measures of core inflation suggest continued downward momentum in CPI

While the decision was largely expected, Canadian stocks are enjoying a broad-based rally on the central bank’s interest rate cut and dovish tone. All 11 S&P/TSX Composite Sectors are green at 9:52 a.m. in Toronto, led by interest-rate sensitive utilities. At the moment, 168 index members rising, 47 falling and 7 unchanged. In FX, the USDCAD rose 0.2% after the decision while Canada 2y yield dips 4bp.

https://www.zerohedge.com/markets/bank-canada-cuts-rates-25bps-expected-first-g7-central-bank-launch-easing-cycle

Gunman fires shots at US embassy in Lebanon, army says

 A gunman fired shots at the U.S. embassy in Lebanon on Wednesday and was wounded in an exchange of fire with troops, the Lebanese army said.

The army said the attacker, a Syrian national, was detained and taken to hospital for treatment and soldiers were searching through the area for other gunmen.

The U.S. embassy said small arms fire was reported near its entrance in the morning but that the facility and staff were safe. U.S. ambassador Lisa Johnson is currently travelling outside Lebanon, according to diplomatic sources.

A Lebanese security source told Reuters on Wednesday morning that a member of the embassy's Lebanese security team was lightly wounded. White House national security adviser Jake Sullivan later confirmed to NBC News that a Lebanese guard was wounded and was receiving treatment.

The embassy said it would remain closed to the public for the rest of Wednesday but planned to be open for business as usual on Thursday, June 6.

There was no immediate claim of responsibility for the attack, but another senior Lebanese security source told Reuters that the army was investigating possible links to the Islamic State group.

The source said the attacker had "ISIS" in English and "Islamic State" in Arabic written on clothes he was wearing. Lebanese security forces have detained two sheikhs as well as the attacker's family, the source added.

Reuters verified pictures of the suspected attacker circulating online and geolocated them to near the embassy. Reuters verified part of the Arabic writing on his vest, which read "Islamic."

A Reuters cameraman saw Lebanese security forces setting up checkpoints around the embassy as a U.S.-made helicopter provided to the Lebanese army circled above.

Lebanon's caretaker prime minister Najib Mikati said he was following up on the incident with the defence minister and security forces.

The U.S. embassy lies north of Beirut in a highly secured zone with multiple checkpoints along the route to the entrance. It moved there from Beirut following a suicide attack in 1983 which killed more than 60 people.

In September, shots were fired near the embassy with no injuries reported.

In mid-October, in the early days of the Gaza war, scores of protesters gathered outside the embassy to demonstrate. Lebanese security forces used tear gas and water cannons to repel them.

Lebanon has been the scene of conflict between Iran-backed Hezbollah and Israel since October in parallel to the Gaza war. Tens of thousands of people on both sides of the Israel-Lebanon border have been uprooted amid fears that the war will escalate.

The United States has been making diplomatic efforts to ease violence along the border.

In a separate incident, a member of Lebanon's internal security forces assigned to provide security at the Saudi embassy in Lebanon committed suicide outside the embassy on Wednesday, a security source and a diplomatic source said.

The security source said the embassy guard died after shooting himself in the head. The diplomatic source said he suffered from mental health conditions.

https://www.yahoo.com/news/gunman-fires-shots-u-embassy-063854584.html

'Hamas signals post-war ambition in talks with Palestinian rival Fatah'

 Deep divisions will limit progress at reconciliation talks between Palestinian factions Hamas and Fatah this month, conversations with five sources in the groups indicate, but the meetings highlight that the Islamist group is likely to retain influence after Israel's war in Gaza.

The talks between Hamas and the Fatah party of Palestinian President Mahmoud Abbas will be held in China in mid-June, according to officials from both sides. They follow two recent rounds of reconciliation talks, one in China and one in Russia. China's foreign ministry declined to comment.

The next meeting will be held amid attempts by international mediators to reach a ceasefire deal for Gaza, with one of the key sticking points being the "day-after" plan - how the enclave will be governed.

Considered a terrorist organisation by many Western nations, Hamas was shunned long before its Oct. 7 attacks killed 1,200 people in Israel, with more than 250 hostages taken, triggering the war in Gaza.

But even as it is pummelled militarily, the meetings of Hamas politicians with officials from the Fatah party that controls Palestinian politics in the Israeli-occupied West Bank point to the group's aim of shaping the post-war order in the Palestinian territories, according to a source familiar with conversations within Hamas.

The person, like other unnamed officials in this story, declined to be named because they weren't authorized to discuss sensitive matters with the media.

Hamas, which ruled Gaza before the war, recognises it cannot be part of any internationally recognised new government of the Palestinian territories when fighting in the enclave eventually ends, said the source.

Nonetheless, it wants Fatah to agree to a new technocratic administration for the West Bank and Gaza as part of a wider political deal, the source and senior Hamas official Basim Naim said.

"We are speaking about political partnership and political unity to restructure the Palestinian entity," Naim, who attended the previous round of China talks, said in an interview.

"Whether Hamas is in the government or outside it, that is not a prime demand of the movement and it doesn't see it a condition for any reconciliation," he said. Naim, like much of Hamas' political leadership, operates in exile outside of Gaza.

The prospect of Hamas surviving as an influential political player is a thorny issue for Western states.

Despite Israeli Prime Minister Benjamin Netanyahu's Gaza war goal of destroying the Iran-backed group, most observers agree Hamas will exist in some form after a ceasefire. An offshoot of the Muslim Brotherhood, the movement has deep reach and ideological roots in Palestinian society.

The United States and EU oppose any role for Hamas in governing Gaza after the war, during which Israel’s offensive has killed more than 36,000 Palestinians, according to the Gazan health ministry.

Still, some U.S. officials have privately expressed doubt Israel will eradicate the group. A senior U.S. official said on May 14 Washington thought it unlikely Israel could achieve “total victory”.

Killing every member of Hamas was unrealistic and was not the goal of the Israeli army, but destroying Hamas as a governing authority was "an achievable and attainable military objective," said Peter Lerner, a spokesperson for Israel's military.

LOW ODDS

Western states support the idea of post-war Gaza being run by a revamped Palestinian Authority (PA), the administration led by Abbas that has limited self-rule over patches of the West Bank. Based in Ramallah, the PA is broadly acknowledged globally as representing the Palestinians and receives security assistance from the United States and the EU.

Led by Abbas, and before him Yasser Arafat, Fatah was the undisputed leader of the Palestinian cause for decades until the rise of Hamas, an Islamist movement.

The PA also ran Gaza until 2007, when Hamas drove Fatah from the enclave, a year after defeating Fatah in parliamentary elections - the last time Palestinians voted.

Despite the talks, the factions' enmity means odds remain low for a deal to reunite the administration of the Palestinian territories, the conversations with the five sources indicated, a view echoed by four experts.

"My expectations of rapprochement are minimal or less," said Yezid Sayigh, a senior fellow at the Carnegie Middle East Center.

Palestinians aspire to a state on all territory occupied by Israel in the 1967 war, when Israel seized the West Bank - including East Jerusalem - and the Gaza Strip.

Despite 143 countries recognising Palestine, including Ireland, Spain and Norway last week, hopes for a sovereign nation have been diminishing for years as Israel expands settlements in the West Bank and opposes statehood.

The Hamas-Fatah split further complicates the goal. The factions hold deeply diverging views about strategy, with Fatah committed to negotiations with Israel to bring about an independent nation while Hamas backs armed struggle and does not recognise Israel.

The bitterness spilled into the open at an Arab summit in May, when Abbas accused Hamas of giving Israel "more pretexts" to destroy Gaza by launching the Oct. 7 attack.

Hamas said the remark was regrettable, calling Oct. 7 a crucial moment in the Palestinian struggle.

Hamas' 1988 founding charter called for Israel's destruction. In 2017, Hamas said it agreed to a transitional Palestinian state within frontiers pre-dating the 1967 war, though it still opposed recognising Israel's right to exist.

Hamas has restated this position since the eruption of the Gaza war.

NEW GOVERNMENT?

In March, Abbas swore in a new PA cabinet headed by Mohammed Mustafa, a close Abbas aide who oversaw Gaza reconstruction during a previous stint in government from 2013 to 2014. Though the cabinet is made up of technocrats, Abbas' move angered Hamas, which accused him of acting unilaterally.

Senior Fatah official Sabri Saidam told Reuters that forming a new government would amount to wasting time.

A second senior official familiar with Fatah's terms for the China talks said it wants Hamas to acknowledge the role of the Palestine Liberation Organisation (PLO) as the Palestinians’ sole legitimate representative, and to commit to the agreements the PLO has signed.

This would include the Oslo accords signed 30 years ago under which the PLO recognised Israel and which Hamas violently opposed.

The official said Fatah would want the government to have full security and administrative control in Gaza - a challenge to Hamas' sway there.

Fundamentally at odds with the PLO over Israel, Hamas has never joined the body but has long called for elections to its governing institutions, including its legislative body known as the PNC.

Hamas political leader Ismail Haniyeh said on Friday that in addition to a government of "national consensus", the group wants elections for the PA presidency, parliament and the PNC.

Ghassan Khatib, a lecturer at Birzeit University in the West Bank, said Hamas was interested in reconciliation only on its terms, maintaining its politics, security apparatus and ideology, which he said would risk plunging the PLO into international isolation.

"Abbas cannot accept them with their politics, because that would jeopardize the only PLO achievement - international recognition," he said.

PART OF THE FABRIC

Despite this, Fatah official Tayseer Nasrallah said Fatah viewed Hamas as part of "the Palestinian national fabric and part of the political fabric also".

Saidam said consensus was necessary to manage aid and reconstruction in Gaza. Fatah had made clear it would not return to Gaza "on the back of an (Israeli) tank, but rather we will come in agreement with everyone", he added.

Israeli government spokesperson Tal Heinrich said the PA’s willingness to work with Hamas was "unfortunate."

An opinion poll conducted in the West Bank and Gaza by the Palestinian Center for Policy and Survey Research in March showed Hamas enjoying more support than Fatah, with its popularity still higher than before the war.

Being hosted by China has marked a diplomatic boost for the Iran-backed Hamas.

Ashraf Abouelhoul, managing editor of the Egyptian state-owned paper Al-Ahram and a specialist on Palestinian affairs, said Hamas was more interested in a deal than Fatah, because reconciliation could give the battle-weary organisation cover to rebuild.

Mohanad Hage Ali of the Carnegie Middle East Center said it was difficult to imagine Hamas embarking on any military action that would prompt large-scale Israeli retaliation in the foreseeable future.

But, he said, reconciliation would be a "transitional phase that would allow Hamas to slowly rearm."

https://uk.news.yahoo.com/hamas-signals-post-war-ambition-060634161.html

Gilead Seladelpar Sustained Consistent Long-Term Efficacy and Safety in Primary Biliary Cholangitis

 

• Positive Results from Two-year Interim Analysis Includes Participants from Phase 3 RESPONSE Study and are Highly Consistent with One-year Interim Analysis
• Reduction in Patient-Reported Pruritus (Itching) was Rapid and Durable in Participants with Moderate to Severe Symptoms
• Subset Analysis of Participants with Compensated Cirrhosis Demonstrated Clinically Meaningful Improvements in Markers of Cholestasis and Liver Injury

https://www.biospace.com/article/releases/gilead-s-seladelpar-demonstrated-a-sustained-and-consistent-long-term-efficacy-and-safety-profile-in-primary-biliary-cholangitis/