North America FI Chart of the Month

...Industry Largely Positioned for Higher Rates: Most of U.S. banks' balance sheets are asset sensitive and are projected to benefit from the recent December 2016 25-bp rate hike. Fitch expects that banks will continue to focus on expense controls in 2017 with some modest earnings benefits from incremental rate hikes. This December's rate hike alone will likely not be sufficient to boost earnings materially. As shown in the top graph, nine of the 17 large commercial banks have lower margins than a year ago, despite last December's initial rate rise. Rally in 10-Year Treasurys: Following an all-time low in early July, 10-year U.S. Treasurys have rallied, particularly following the unexpected presidential outcome, and are now over 100bps higher since that time. As a result, unrealized gains in bank securities portfolios have been wiped away and now stand at an aggregate unrealized loss position for the industry. While most banks report under the standardized approach, this rally still affects...

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