04/16/2024 | Press release | Distributed by Public on 04/16/2024 06:36
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:
To request a copy of the 2024 U.S. Bank Market Report, please contact [email protected].
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SOURCE S&P Global Market Intelligence