Nov 13 - The outlook for the U.S. banking industry remains broadly stable
for 2013, predicated on solid balance sheets and liquidity combined with stable
to improving earnings profiles at most banks, according to Fitch Ratings.
Regulatory uncertainties will persist through 2013 as interpretive and
implementation issues are clarified. In the longer term, Fitch considers the
general direction of enhanced regulation as a positive.
Fitch expects some earnings pressure due to margin contraction and less reliance
on reserve releases to generate earnings. Against this backdrop, banks should
remain broadly profitable in 2013, albeit at reduced levels compared to 2012.
As regulatory and margin pressures take hold, Fitch expects that
consolidation-driven M&A activity may increase in 2013. Smaller banks are more
likely consolidation candidates, either among themselves or by larger
institutions, as they may be less able to cope with more stringent capital
standards and adapt their business models over the long term.
Fitch's base case assumption is that U.S. policy makers will resolve issues
related to the fiscal cliff and euro zone governments will prevent any
disorderly shocks. However, these twin issues pose serious risks to U.S. banks
if not adequately addressed.
As part of its recent periodic rating review on its Global Trading and Universal
Bank (GTUB) peer group, Fitch affirmed the ratings on five major U.S. banks.
Fitch also recently conducted peer reviews on 10 community banks with
affirmations for all, although two Outlooks were revised to Negative. Fitch also
affirmed all 14 large regional banks as part of the large regional bank periodic
review with a few Rating Outlooks revised to Positive from Stable.
The full report '2013 Outlook: U.S. Banks: Similar Themes, Different Year' is
available at 'www.fitchratings.com.'
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2013 Outlook: U.S. Banks (Similar
Themes Different Year)