NEW
YORK, April 16, 2024 /PRNewswire/ -- Higher
credit costs are expected to serve as a modest headwind
to U.S. bank earnings this year, according to S&P Global
Market Intelligence's newly released U.S. Bank Market
Report. U.S. bank earnings are expected to dip 2.8 percent
year-over-year, excluding the purchase gains associated with the
three failed bank acquisitions in 2023, as modest margin pressure
and notably higher credit costs prevent earnings growth.
"Even as interest rates are expected to fall in the second half
of 2024, deposits remain firmly in focus for U.S. banks," said
Nathan Stovall, director of
financial institutions research, S&P Global Market
Intelligence. "Customers continue to shift funds into
higher-cost products and demand higher rates for their funds, while
regulators are encouraging banks to hold more liquidity, leading to
pressure on net interest margins. That pressure will eventually
subside but will be replaced by higher credit costs, particularly
as banks begin to recognize losses on their commercial real estate
portfolios and reserve for future problems."
Earnings should rebound strongly for most institutions in 2025
and 2026 as institutions weather the credit cycle, absorb losses
and record lower provisions for loan losses. This in turn could
bring many investors back to the banking group, and banks whose
credit quality outperforms others should attract even greater
investor interest as they will boast even stronger earnings streams
that allow them to play offense through organic growth and by using
their superior currency for acquisitions.
Key highlights from the report include:
- Fierce deposit competition should persist amid regulatory
pressures and higher-for-longer interest rates as banks place a
higher value on deposits than other forms of funding.
- Bank credit quality is expected to weaken in 2024 and 2025, led
by higher delinquencies and losses in the commercial real estate
(CRE) portfolios, but the deterioration will serve as a hit to
earnings rather than a threat to safety and soundness for most
institutions.
- Regulators have reiterated the importance of banks maintaining
strong risk management of their CRE portfolios, particularly for
institutions with elevated CRE concentrations. In some cases,
regulators have imposed independent minimum capital requirements
for banks with elevated CRE concentrations.
- U.S. bank earnings are expected to rebound strongly in 2025 and
2026 as provisions for loan losses decline and become a much
smaller headwind to earnings.
To request a copy of the 2024 U.S. Bank Market Report, please
contact press.mi@spglobal.com.
S&P Global Market Intelligence's opinions, quotes, and
credit-related and other analyses are statements of opinion as of
the date they are expressed and not statements of fact or
recommendation to purchase, hold, or sell any securities or to make
any investment decisions, and do not address the suitability of any
security.
About S&P Global Market Intelligence
At S&P Global Market Intelligence, we understand the
importance of accurate, deep and insightful information. Our team
of experts delivers unrivaled insights and leading data and
technology solutions, partnering with customers to expand their
perspective, operate with confidence, and make decisions with
conviction.
S&P Global Market Intelligence is a division of S&P
Global (NYSE: SPGI). S&P Global is the world's foremost
provider of credit ratings, benchmarks, analytics and workflow
solutions in the global capital, commodity and automotive markets.
With every one of our offerings, we help many of the world's
leading organizations navigate the economic landscape so they can
plan for tomorrow, today. For more information, visit
www.spglobal.com/marketintelligence.
Media Contact
Katherine Smith
S&P Global Market Intelligence
+1 781 301 9311
katherine.smith@spglobal.com
View original content to download
multimedia:https://www.prnewswire.com/news-releases/sp-global-market-intelligence-us-bank-market-report-finds-earnings-are-expected-to-fall-2-8-year-over-year-in-2024--but-rebound-strongly-in-2025--302117149.html
SOURCE S&P Global Market Intelligence