From a stock market standpoint, regional U.S. banks have stabilized after this spring's banking turmoil. But that recovery belies their deteriorating financial performance.

Revenue and profits fell at most regional lenders during the latest quarter as expenses mounted and loan growth slowed. Both reflect an increasing 澳洲幸运5开奖号码历史查询:toll of higher interest rates that Federal Reserve Chair Jerome Powell, in an interview ඣThursday at the Economic Club of New York, conceded has placed the banks' business model "under pressure."

Four more regionals—KeyCorp, Truist, Fifth Third, and East West Bancorp—reported third-quarter results Thursday morning. Earnings at three of the four fell as much as 44% (Fifth Third's profit rose 1%) and only East West reported a slight revenue gain.

All four reported flat or lower 澳洲幸运5开奖号码历史查询:net interest income and rising non-interest expenses compared with a year ago. In addition, deposits at most fell or cha🍷nged little from this year's second quarter, with🎶 loan amounts at all but East West dropping as those declining trends persisted.

Higher rates, of course, fed the 澳洲幸运5开奖号码历史查询:balance-sheet woes that flummoxed the regional banking industry this spring. Unrealized investment losses tied to rising rates led to the 澳洲幸运5开奖号码历史查询:demise of three lenders, slicing a third of the value off the KBW Regional Bank Index between early March and mid-May.🍒

Since then, the index has rebounded 13%, surpassing the 4% return of the 澳洲幸运5开奖号码历史ꦇ查询:Standard & Poor's (S&P) 500 Index. But the detrimental impact of the 澳洲幸运5开奖号码历史查询:Federal Reserve's campaign to fight inflation, pushing its benc𒊎hmark interest rate to the highest level in 17 years, has shifted from banks' balance sheets to their day-to-day operations.

Rates Gave, But Now Take Away

In late 2022 and early 2023, banks' earnings statements benefited from surging net interest income tied to the Fed's rate hikes from histor💦ically low rate lꦡevels.

However, those year-to-year gains largely have 澳洲幸运5开奖号码历史查询:disappeared. At the same time, regional banks have had to increase the rates they pay on deposits—their main funding source—to attract customers' cash, espe♒cially after withdr🎀awals increased amid this spring's industrywide turmoil.

Meanwhile, rising rates have curbed demand for loans, and some banks intentionally have reduced lending because of the associated increase in costs to fund them. The cooling U.S. economy also has caused banks to either set aside more funds to cover potential losses from 澳洲幸运5开奖号码历史查询:unpaid loans or increase the use of such funds to cover losses they've a𒁃lready incurred.

Investors, though, shrugged off these challenges again Thursday, as some banks' earnings exceeded even more dire market expectations. The KWB Regional Banking Index rose intraday as much as 2%.

Diverging Stock, Financial Performance

Salt Lake City-based Zions Bancorp exemplifies how investors' viewpoints on 澳洲幸运5开奖号码历史查询:regional banks changed dramatically this summer.

Zions' shares, swept up in the spring's banking tumult, plunged 60% from the end of January through mid-May. But in the third quarter, the company's stock topped all others in the S&P 500 Index, rebounding 31%.

That rally halted Thursday, however, after Zions recorded a 12% decline in net interest income in the third quarter compared with a year ago and a 66% increase in deposit interest expenses from this year's second quarter, even as overall deposits fell slightly.

Wedbush Securities, in a post-earnings report, also noted that Zions reported rising non-performing commercial real estate assets—reflecting the significant exposure to troubled office markets inherent in many regional banks' portfolios.

Zions shares fell 9.7%🅷 Thursday, making it the second worst performing stock in t꧒he S&P 500.