DBRS Morningstar: US banks “stable” in 2022

The US banking sector has a “stable” outlook for 2022, according to DBRS Morningtar, as the ratings agency said it expects some “normalization of earnings”.

DBRS Morningstar’s analysis of US banks suggested that a growing economy, rising interest rates and increased demand for loans will contribute to “net income expansion” this year.

It added, however, that pressures from rising inflation and Covid-19 pandemic expenses remain threats to the performance of banking institutions in the US.

At the height of the Covid-19 pandemic, DBRS Morningstar had placed negative trends on US banks. The latest revision of this to ‘stable’ is a reflection of “the sound performance of the banks during this period”, it said, as the US Federal Reserve and government stimulus during the pandemic insulated banking assets.

“DBRS Morningstar anticipates a Stable rating outlook for US banks in 2022, following the reversal in 2021 of the majority of the Negative trends that were put in place in 2020 at the beginning of the pandemic,” said John Mackerey, senior vice president, Global Financial Institutions Group.

In January, Fitch Ratings’ research suggested that US banks would pursue growth via acquisitions in 2022.

Primary drivers of this, Fitch said, included increased scale, enhanced franchise strength through either new geographies or by growing market share within their existing footprint.

However, the ratings agency also warned that increased scrutiny from the government could lead to rising execution risks for future deals, as well as banks with in-process transactions.

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