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DBRS Morningstar: U.S. Banks – Operating Environment Conducive to NII Growth in 2022

DBRS Morningstar: U.S. Banks – Operating Environment Conducive to NII Growth in 2022

NEW YORK–(BUSINESS WIRE)–DBRS Morningstars outlook for the U.S. banking sector is Stable. We expect earnings to return to normal as reserve releases slow, but we expect a growing economy, rising rates, and improved loan demand to drive net interest income growth in 2022. Bank performance is still at risk from inflationary pressures and uncertainty from the Coronavirus Disease (19COVID-19), pandemic. DBRS Morningstar updated the trends for the vast majority U.S. banks that had negative trends at the onset. They were now stable. These revisions reflect the strong performance of banks during this period, as aggressive actions by the Fed and government stimulus supported the economy through the pandemic, insulating banks from potential asset quality issues.

These are some of the key highlights

  • We expect some normalization of earnings, as reserve releases moderate. However, we expect a growing economy, rising rates and improved loan demand to encourage net income expansion in 2022.
  • DBRS Morningstar changed the trends of the majority U.S. banks’ public ratings to Stable during 2021. The pandemic that protected banks from asset quality problems was supported by aggressive Fed actions as well as government stimulus.
  • Overall results improved in 2021 largely due to reserve releases and strong revenue from capital market and other fee income sources including wealth management and mortgage lending.

DBRS Morningstar predicts a stable rating outlook in U.S. banks by 2022, after the reverse of most of the Negative Trends that were in place in 2020 during the pandemic, according to John Mackerey (Senior Vice President, Global Financial Institutions Group).

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See Also

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