U.S. banks are forecasting a decline in net interest income due to consumer-deposit repricing, according to a research note by Ken Usdin following the BancAnalysts Association of Boston conference. JPMorgan Chase & Co. (NYSE: JPM ), Goldman Sachs Group Inc (NYSE: GS )., and Morgan Stanley are among the universal banks that are top picks in this backdrop. Trust banks such as Bank of New York Mellon (NYSE: BK ) Corp. and State Street Corp (NYSE: STT )., along with regional and mid-sized banks like Fifth Third Bancorp (NASDAQ: FITB ) and Western Alliance (NYSE: WAL ) Bancorp, are also favored.
Lower interest rates from the Federal Reserve, a soft jobs report, and falling Treasury yields are viewed positively by banks. However, the outlook for loan growth remains subdued due to conservative borrowers. JPMorgan Chase anticipates a decrease in its net interest income, while PNC Financial Services Group Inc (NYSE: PNC ). expects some consumer deposits to be repriced.
KeyCorp (NYSE: KEY ), Regions Financial Corp (NYSE: RF )., and Trust Financial Corp. predict a rebound in capital-markets fees by 2024. Meanwhile, Citigroup is undertaking "Project Bora Bora," which involves staff reductions of at least 10%.
Banks do not foresee major credit concerns outside of office commercial real estate, with lease renewals being critical for determining loss magnitude. Credit card loss rates are expected to normalize as the labor market provides clues on potential consumer losses.
Uncertainty over wealth-management units has eased, and demand-deposit account balances are projected to decrease. Mortgage activity is expected to remain subdued, but rising rent levels support borrowers in a higher-for-longer rate environment.
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