The U.S. banking industry has found greater stability after bank failures in March and April 2023, and S&P Global Ratings expects most banks to perform well and build capital in 2024, according to its 2024 U.S. Bank Outlook.
Still, potential further declines in deposits, funding cost pressures, unrealized losses, commercial real estate exposures, and economic uncertainty remain key risks.
Also, regulators last year proposed important changes to capital and resolution requirements. They could finalize those in 2024, perhaps with some alterations. They also may propose further updates to supervision and regulation in the wake of the failures.
The outlook’s other expectations for this year include:
With the Fed holding rates flat before pivoting to rate cuts sometime in mid-2024, expect banks to see deposits decline only modestly and likely funding costs level off in the first half of the year.
Profitability will dip but remain