As banks kick off earnings season on Friday, analysts predict provisions could rise for potential losses on commercial and industrial loans, as well as those on commercial real estate
Some of the largest U.S. banks will probably report weaker profits for the second quarter as they earn less from interest payments and set aside more money to cover deteriorating loans, analysts said.
C&I loans pose greater risks to major banks than they did in 2023, according to the Federal Reserve’s latest health check last month. Under the Fed’s stress-test scenario, C&I loss rates are projected to rise to 8.1 per cent, from 6.7 per cent in last year’s exam.Merger and acquisition volumes hit $1.6-trillion globally in the first half of the year, up 20 per cent from a year earlier, Dealogic data showed. Equity capital market volumes climbed 10 per cent during the same period.
“All the deposit customers that were going to move their deposits for a higher rate in a money market account or at an internet bank have probably done it,” said Chris Kotowski, a banking analyst at Oppenheimer. Banks can then put those deposits to work by repricing loans at higher levels.
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