September 14, 2022 | Premium Service | In this issue of The Institutional Risk Analyst, Whalen Global Advisors LLC publishes the latest edition of The IRA Bank Book, the quarterly outlook for the US banking industry. The highlights of the new edition of The IRA Bank Book include:
Income for the US banking industry surged in Q2 2022. WGA projects that industry income for US banks will continue to improve faster than expected by most analysts.
Loan growth for US banks is strong and likely to accelerate in 1H 2022 even as the FOMC ends its asset purchases and allows excess reserves in the system to decline.
Credit losses for US banks remain very depressed due to QE. The process of normalization of credit and funding costs represents an opportunity for better-managed lenders able to reprice earning assets to take advantage of low deposit rates.
Rising interest rates and lending volumes have caused the principal balance of home equity lines of credit (HELOCs) owned by banks to rise for the first time since 2008.
“The same people who were telling clients to buy large cap bank stocks like JPMorgan (JPM) at 2x book value a year ago are now running away from bank stocks just as the fundamentals are starting to improve,” notes WGA Chairman Christopher Whalen. “We expect to see reasonably strong earnings for lenders in Q3 2022 as loan yields slowly rise, but the market-facing firms are likely to deliver weak results.”
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