Credit Costs Decline for Fourth Consecutive Quarter

BRIARCLIFF MANOR, NEW YORK / ACCESSWIRE / December 17, 2024 / Whalen Global Advisors LLC (WGA) has published the latest edition of The IRA Bank Book, the quarterly outlook for the US banking industry. The highlights of the Q4 2024 report include:

• A discussion of US banking industry revenue and earnings, and the outlook for 2025. Net interest margin grew modestly Q3 2024, but a weakness in fee income pushed overall results down vs Q2 2024. WGA expects industry revenue to grow in 2025 as the Fed begins to expand liquidity to accommodate rising federal debt.

"The Fed's half-hearted fight against inflation is officially over," notes WGA Chairman Christopher Whalen. "The FOMC has really not reduced reserves or the level of liquidity meaningfully."

• Updated credit charts are included in the report showing the components of commercial real estate (CRE) loans and related data series including delinquency, net loss and loss-given-default, and aggregate exposure at default (EAD) for the industry. The report notes that loss severities on multifamily and CRE categories are above pre-COVID levels, but well-below 2008 levels of loss.

• The report highlights the continued duration risk hidden on the books of US banks because of the industry trend since 2008 to retain securities in "held to maturity" instead of available for sale.

"Realized loss rates in the banking industry have been falling for four quarters," notes Whalen. "With the exception of commercial real estate and multifamily assets, the rest of the real estate sector shows little credit stress. Because the Fed is aggressively pushing liquidity out of reverse repurchase agreements, we expect bank deposits and industry assets to grow in 2025."

WGA notes that bank stock prices have soared in the second half of 2024, with the WGA Bank Top 10 Index up 40% year-to-date in 2024. "If the rate of increase in credit expenses continues to build in Q4 and 2025, that would provide a catalyst for some profit taking in the sector," Whalen notes in a recent report.

Copies of the IRA Bank Book report are available to subscribers to the Premium Service of The Institutional Risk Analyst. Stand alone copies of the report are also available for purchase in our online store. Media wishing to receive a courtesy copy of the report please email us: info@rcwhalen.com.

About Whalen Global Advisors LLC

Whalen Global Advisors LLC is a New York-based consulting, publishing and financial analytics firm. We publish The Institutional Risk Analyst newsletter (ISSN 2692-1812), The IRA Bank Book (ISBN 978-0-692-09756-4) industry quarterly review and the WGA Bank Top Indices. For more information, please contact us:: info@rcwhalen.com

Contact Information

Chris Whalen
Chairman
chris@rcwhalen.com
914-645-5304

SOURCE: Whalen Global Advisors LLC