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In This List
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U.S. Bank Outlook 2019 Still Sunny, But The Good Times May Be Behind Us

Highlights

- S&P Global Ratings expects U.S. banks to face continued market volatility in 2019 stemming from a slowdown in economic growth, policy uncertainty, rising rates, and monetary tightening.

- Although it is not our current base, we believe we are incrementally closer to a turn in the credit cycle in 2019. When the credit cycle does turn, bank profitability will come under pressure as imbalances brought on by years of excess liquidity and low rates will flow through banks' income statements and balance sheets.

- Key areas of concern in credit are commercial and industrial (C&I) -- particularly leveraged lending, commercial real estate (CRE), and pockets of consumer credit -- credit cards, auto, and personal loans.

- Separately, fee income could come under pressure as the economy slows and if market valuations decline. Bank revenues in areas like assets and wealth management may also decline because they are tied, in part, to market valuations. Fees for originating and selling mortgage loans could also drop.

- Nevertheless, U.S. bank balance sheets are sound, with higher capital and liquidity levels, and we believe rated banks are well prepared to withstand potentially weakening credit conditions.

- New regulation may result in lower capital and liquidity levels for some (mainly regional) banks. On the other hand, the stressed capital buffer (SCB) proposal could prompt some global systemically important banks (GSIBs) to continue to face higher capital requirements.

- Longer term, from a business standpoint, it will be important for bank management teams to remain vigilant to disruption from technologically sophisticated competitors (fintechs), as well as to the threat of cyberattacks.

- Under our base-case scenario, we expect bank ratings to remain largely stable through 2019. 83% of our operating company ratings currently have stable outlooks, 8% have positive outlooks, and 9% have negative outlooks.

Our Fundamental Forecast For U.S. Banks In 2019 Remains Slightly Positive

Current U.S. Bank Ratings Distribution

Current Bank Ratings Outlooks

Bank Profitability Trends

Loan Growth Trends

Flattening Yield Curves And Rising Deposit Costs Should Lead To Decelerating NIMs

Asset Quality Is Excellent But Likely Will Deteriorate Incrementally As Rates Rise

Aggregate Net Charge-Off Rates Remain Below Historical Levels

Investment-Grade Loans Moving To Speculative-Grade Could Pressure Banks' C&I Portfolios

Low Interest Rates Have Helped Keep Debt Service Low For Consumers, But Trends Could Be Less Benign As Rates Turn Higher

The Evolving Composition Of Consumer Debt

Postcrisis Credit Card Loan Growth Has Been Robust

Capital Levels Are Likely To Decline For Regional Banks But May Increase For Some GSIBs

All Eight U.S. GSIBs Are Above Their Required Regulatory Minimums

Bank's Funding Profiles Remain In Good Shape

Liquidity Looks Decent, But Regional Banks' Liquidity Could Decline Due To A Recent Regulatory Proposal