Title: Q2 Outlook for Commercial Banks: What’s Next for Bank Performance and the Economy
Duration: 1 hour
Going into 2023, the U.S.
economic climate included a convergence of factors that the U.S.
had never experienced before.
The combination of increases in the money supply, decreases in labor supply and elevated high inflation forced the Fed to implement the swiftest pace of tightening of monetary policy in 40 years.
Reduced economic production from China and global geopolitical issues added another layer of complexity to the situation.
Despite all these circumstances, the U.S.
economy continued to show signs of strength, making it extremely difficult to model future economic conditions for 2023.
Now, following the recent turmoil in the banking sector, the outlook for the U.S.
economy and bank performance has got even murkier.
Turbulence in the banking sector poses downside risks to the economic forecast and may force the Fed to stop raising rates sooner than anticipated.
A recession in the U.S.
seems likely, but the timing and severity remains in question.
Meanwhile in bankland, as interest rates have surged, the values of bonds that most banks own have taken considerable hits, leaving institutions with large amounts of unrealized losses in their available-for-sale portfolios, reducing banks’ access to liquidity. Rising rates have also caused deposits to leave
the banking system, putting pressure on banks’ liquidity positions, all of which contributed to the recent banking failures.
During this discussion, we’ll examine the latest outlook for the U.S. economy, as well as review our proprietary projections for commercial bank performance to bring clarity to the questionable operating environment for U.S Commercial Banks.