Strong Loan Growth, Margin Expansion Cannot Save US Bank Earnings in 2022
Bank earnings will fall by 8.42% in 2022, S&P Global Market Intelligence projects in the newly released U.S. Bank Market Report, as an especially challenging year-over-year comparison will mitigate the benefits of higher interest rates.
The Federal Reserve's efforts to combat inflation will boost banks' net interest margins, but mountains of excess liquidity will prevent the key metric from returning to pre-pandemic levels in excess of 3.30% until 2026. At the same time, bank earnings will no longer receive a huge boost from reserve releases. Higher rates will support notable earnings growth in 2023 even as credit quality normalizes, but the gains might fall short for many banks and should encourage more M&A activity.
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