U.S. Banks Webinar Q4 2023 Slides: New Year, Different Challenges

S&P Global Ratings' banks team hosted a webinar today to discuss its views following fourth-quarter results and its outlook for 2024. In 2023, analysts lowered ratings on nine banks, including two that failed, revised outlooks on five banks to negative, and revised outlooks to stable from positive on four banks. However, outlooks on U.S. bank ratings have remained largely stable for several months without a reemergence of the funding and liquidity stresses of the first half of last year.

...Net interest income (NII) will likely be moderately down, with funding costs up incrementally in the first half and asset yields down if the Fed cuts rates. Fee income may pick up in some areas, especially if rates fall, such as mortgage and investment banking. Trading revenues may remain relatively robust. Overall expenses should drop in 2024 due to one-time charges in 2023. On adjusted basis, banks will also keep focusing on core expenses, though inflation and investments in technology may push them higher. Profitability will weaken somewhat on lower NII. We think provisions in 2024 will also climb higher. We expect an industry return on common equity of around 10%, down from greater than 11% in 2023. We expect delinquencies and charge-offs, particularly in certain asset classes, to continue rising amid limited economic growth, declining consumer savings, and stress in areas like commercial real estate. Many banks will increase capital ratios further by limiting payouts to support confidence...

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