Economic indicators

The American Bankers Association's latest credit conditions indices show that economists at major banks are feeling more confident about commercial lending in 2024 — but they stop far short of a ringing endorsement.

Executives at America's largest banks are making rosier predictions about the financial health of U.S. households than they were a year ago, when their forecasts proved to be overly pessimistic.

A key gauge of activity that tracks startups most likely to create jobs declined in October, potentially signaling the start of a slowdown after the rapid increase in interest rates. It presents a red flag for community banks and credit unions that are major lenders to small businesses.

Broader economic factors, including growing household debt, are also likely to keep the housing market stagnant, Freddie Mac said.

Banking executives anticipate that loan demand will remain muted over the next 12 months, according to a new survey by the financial services firm IntraFi. That finding lines up with bankers' expectation that rates won't start declining until at least the second half of 2024.

The financial landscape is currently riddled with warning signs that point toward potential liquidity issues for banks.

Mergers and acquisitions are rebounding and equity capital markets are thawing, says C.S. Venkatakrishnan. That's a welcome forecast after a persistent slump sapped investment banking revenue across the industry. 

More than half of 526 respondents to a Markets Live Pulse survey said that personal consumption — the most important driver of economic growth — will shrink in early 2024, which would be the first quarterly decline since the onset of the pandemic.

As consumers' cushion shrinks, they are becoming more dependent on their paychecks to maintain their standard of living. Economists are split on whether wage growth is strong enough to fill the gap.

Community bankers anticipate that interest rates could soon level off and the broader economy may avert a downturn as a result. If that forecast proves true, lenders could minimize credit losses and enjoy stronger loan demand than they had expected earlier in the year.

Stock markets have shot up as investors grow hopeful that the United States will avoid a recession. But nearly 3 in 4 community bankers are less optimistic that the Fed will achieve its mission of reducing inflation without causing a downturn, a survey from IntraFi found.

They're wary of deteriorating economic conditions and the bite higher interest rates could take out of profits, according to the latest index of small-bank executives' sentiments by the Conference of State Bank Supervisors. The index fell to its lowest level since it was created in 2019.

The American Bankers Association's credit conditions index remained near historic lows despite a slight uptick in the most recent quarter. Pessimism pervaded the outlook for both business and consumer lending.

Morgan Stanley's investment bank and its giant wealth unit surpassed analysts' expectations in the first quarter even as profits fell from a year earlier, dragged down by a drop-off in dealmaking and a jump in loan-loss provisions.

The largest U.S. bank by assets raised its forecast for net interest income in 2023 to $81 billion from $74 billion, a positive sign for investors wondering how an economic downturn might weigh on profits.

Misleading data and hypersensitivity left over from the last financial crisis have us scared of shadows. The U.S. consumer is actually in pretty good shape.

The Canadian bank now expects loan growth in the mid-single-digit range this year, down from a high-single-digit forecast three months ago. "We're not slowing, but the economy is," one executive said.

On Tuesdays, this band of seven Republican senators, which includes some of the chamber's leading obstructionists, meets to plot ways to extract austere spending concessions from Democrats in exchange for their help in averting a catastrophic U.S. payments default.

Ultraconservatives in the House have dominated the public discussion on the U.S. debt ceiling, but Speaker Kevin McCarthy can't afford to ignore GOP centrists if the country is to avoid a catastrophic payments default later this year.

The Birmingham, Alabama, bank expects up to $5 billion in additional deposit declines in the first half of 2023 but is hopeful for potential growth in funding later this year.