May 07, 2024 (MLN): The majority of the twenty largest U.S. banks in Fitch’s rated portfolio (excluding the Trust & Processing banks and foreign banking organizations) reported negative yoy earnings growth in Q1 2024, says Fitch Ratings.
Banks remain challenged by rising deposit costs, stressed commercial real estate (CRE) books, weak loan growth and an uncertain regulatory environment.
However, the most recent quarter encouraged cautious optimism for near-term performance, as profitability and credit quality pressures appeared to ease.
Following roughly two years of slow or negative growth, fee income partly recovered during the quarter, particularly in investment banking.
Provisioning for loan losses, which grew rapidly from mid-2022 onwards, stalled across most large firms in Q1 2024, suggesting a more stable run rate of credit costs moving forward.
A similar pattern was evident in non-interest expenses, which almost uniformly declined qoq across the cohort.
Net interest margin (NIM) compression, evident since the end of 2022, decelerated during the first quarter.
Overall, moderating earnings and asset quality headwinds coupled with healthy loss-absorption capacity support a narrative that banks’ credit profiles are stabilizing.
