Banks Beating Expectations but Higher for Longer Looms
Oct 17, 2023
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Bloomberg News Americas Finance Team Leader Sally Bakewell and Cheryl Pate discuss bank earnings and outlook. Joel Weber and Ashley Carman explore Taylor Swift's re-recorded albums and the unique economics of the music industry. Ana Arsov highlights the performance of big banks and the metrics to consider.
Large banks show strong financial performance and market share gains in capital markets, while regional banks face unique challenges such as deposit stability, net interest margin, and commercial real estate exposure.
Investors have a more measured approach to evaluating banks, focusing on metrics like loan quality, commercial real estate exposure, and asset quality, and are closely monitoring bank performance in a favorable market environment.
Deep dives
Positive performance of large banks
The big banks, such as JP Morgan, Bank of America and Wells Fargo, have reported strong financial performance, demonstrating their ability to weather market challenges and benefit from market share gains in capital markets activities. While some banks, like Goldman Sachs, face specific challenges such as asset management losses and business restructuring, the overall outlook for large banks is positive.
Divergence in performance among regional banks
Regional banks face different dynamics compared to large banks. Factors such as deposit stability, net interest margin, commercial real estate exposure, and capital positions are significant considerations for regional banks. The unwinding of deposits, the impact of rising rates, and increased regulation will play a role in shaping their performance. It will be important to monitor these factors as regional banks report their results.
Asset shifts and investor sentiment
The banking sector has seen deposits leaving as investors diversify their deposit franchises, with both large and small banks experiencing some outflows. However, investor sentiment has calmed down compared to earlier this year, with a better understanding of the metrics that investors need to focus on when evaluating banks, including loan quality, commercial real estate exposure, and positive growth prospects.
Debt issuance and investor reception
Banks have been issuing debt in a favorable market environment, taking advantage of favorable market conditions and investor demand. While market sentiment has improved, investors are closely monitoring bank performance metrics, such as asset quality, to assess risk and make investment decisions. Overall, investors have a more measured approach, assessing individual banks based on their specific metrics and risk exposures.
Bloomberg News Americas Finance Team Leader Sally Bakewell and Cheryl Pate, Senior Portfolio Manager at Angel Oak Capital, discuss bank earnings and outlook. Bloomberg Businessweek Editor Joel Weber and Bloomberg News Entertainment Reporter Ashley Carman talk about Ashley's Businessweek Magazine story Taylor Swift Re-Recorded Albums Into Hits. Can It Be Replicated? And we Drive to the Close with Ana Arsov, Global Co-Head of Banking at Moody’s. Hosts: Carol Massar and Tim Stenovec. Producer: Paul Brennan.