Net interest income guidance held, with charge-offs normalising rather than deteriorating, executives said.
Large US banks are telling investors that credit quality is holding steady as the Federal Reserve edges closer to its first rate cut in more than four years.
Net interest income guidance was largely unchanged in recent presentations, with executives saying loan growth is picking up in commercial and industrial segments while consumer delinquencies remain near pre-pandemic levels. Charge-offs are normalising from unusually low levels rather than deteriorating, management teams emphasised.
The prospect of lower rates is a mixed bag for lenders: it reduces the unrealised losses on securities portfolios but can compress lending margins if deposit costs do not fall in lockstep. Traders are focused on how quickly banks can reprice loans as the yield curve shifts.
Analysts expect capital markets revenue to provide an offset to any net-interest-income pressure, with debt issuance and M&A activity picking up from depressed 2023 levels. Buyback programmes remain a key driver of earnings-per-share growth for the best-capitalised banks.