US banks expect robust earnings growth through 2019S&P Global Market Intelligence, a leader in multi-asset class research data and insight, launched the 2017 US Bank Market Report and the 2017 US Community Bank Market Report.
The reports, which offer a five-year comprehensive analysis and outlook on the US banking and community banking industries, anticipate 2017 earnings growth of 10.6% and 5.5% for U.S. banks and community banks, respectively, although performance could still fall short of some market expectations. In addition to rising interest rates and better-than-expected credit quality, possible regulation rollbacks and corporate tax reform could give earnings an additional boost starting in 2018.
The US Bank Market report finds bank stocks have jumped close to 30% since the U.S. presidential election in November 2016 on the expectation that the industry's performance could improve substantially. While higher interest rates will mean sustained expansion in U.S. banks' net interest margins and push returns on equity to levels not seen since the financial crisis, corporate tax and regulatory reform might have to become reality for returns to meet the Street's expectations. The rebound in bank stocks could also mean more community bank M&A activity, as buyers can more easily ink accretive acquisitions while satisfying sellers' expectations, according to the US Community Bank Market Report.
S&P Global Market Intelligence analyzed nearly 10,000 banking subsidiaries, covering the core banking industry from 2005 through 2016. The analysis includes all commercial and savings banks and savings and loan associations, including historical institutions as long as they were still considered current at the end of a given year.
The analysis looked back more than a decade to help inform projected results for the banking industry by examining long-term performance over periods outside the peak of the asset bubble from 2006 to 2007. S&P Global Market Intelligence has created a model that projects the balance sheet and income statement of the US banking industry and allows for different growth assumptions from one year to the next.
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Source: S&P Global Market Intelligence
Date: 30.03.2017