NEW YORK--The U.S. banking industry has found greater stability following bank failures in March and April 2023, and S&P Global Ratings is projecting that most banks will perform well and build capital in 2024.
The company’s newly published 2024 U.S. bank outlook, however, also sees potential further declines in deposits, funding cost pressures, unrealized losses, commercial real estate exposures, and economic uncertainty remain key risks.
The report further notes that in 2023 regulators proposed important changes to capital and resolution requirements. They could finalize those in 2024, perhaps with some alterations. Regulators also may propose further updates to supervision and regulation in the wake of the failures.
Additional Expectations
S&P Global Ratings is also forecasting:
* With the Fed holding rates flat before pivoting to rate cuts sometime in mid-2024, we expect banks to see deposits decline only modestly and likely funding costs level off in the first half of the
* Profitability ill dip but remain in good shape, and banks will build capital. While net interest income may decline in 2024, we expect banks to generate a return on common equity of 10%-11% in 2024.
* Asset quality pressure will increase but remain manageable
* Key risks to these expectations include the economy entering a deeper recession with higher unemployment, and asset quality deteriorating significantly, as well as high inflation persisting despite a slowdown in growth, forcing the Fed to maintain higher rates for longer
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