2022 US Bank Market Report

S&P Global Market Intelligence released its 2022 US Bank Market Report. Elevated inflation will push the Federal Reserve to tighten monetary policy at a quicker pace than seen in the last 20 years. Unlike in past rate hike cycles, U.S. banks stand awash in excess liquidity, which will allow institutions’ earning assets to reprice much more quickly than deposit costs and will lead to notable net interest margin expansion. That expansion will occur as credit quality normalizes, but higher losses should prove manageable for the banking industry. 

Key Takeaways:

• U.S. bank earnings will fall 8.4% in 2022 as the absence of reserve releases creates difficult year-over-year comparisons.
• Fed actions to combat elevated inflation through rate hikes and the shrinkage of its $9 trillion balance sheet will boost net interest margins 21 basis points in 2022 and another 23 bps in 2023. Despite the expansion, margins would still remain 38 bps below pre-pandemic levels.

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