America’s mid-sized banks are increasing the industry with strong fee income
By Manya Sani and Niket Nishant
(Reuters) – U.S. banks reported bigger fourth-quarter profits on Friday, extending a winning streak to the industry as a surge in capital markets eased weak credit demand.
Investment banking and trading are becoming increasingly important to mid-sized banks, as a strong trading environment offers viable payment prospects, while Wall Street is believed to be a stronghold of the likes of JPMorgan Chase and Goldman Sachs.
Danny Hewson, head of financial analysis at AJ Bell, said: “Bargaining is back with a vengeance.
The growth of investment banking has helped medium-sized banks to offset the effects of low credit demand by allowing them to raise interest rates for borrowers.
“If the incoming president follows through on his promises for deregulation and tax cuts, the outlook for 2025 will continue to generate a lot of excitement among bank chiefs,” Hewson said.
Citizens Financial, Trust Financial, Huntington Bancshares and Regions Financial all beat expectations for quarterly profits, according to data compiled by LSEG earlier this week, mirroring the outperformance of their larger peers.
Truist shares were up nearly 3% before the bell, with Regions Financial up 0.7% and Huntington up 1.2%.
On Thursday, US Bancorp and M&T Bank reported strong fourth-quarter profits, led by higher fee income.
‘TRUMP BUMP’
Analysts predict the investment banking sector will see a “Trump bump” under the new administration due to corporate tax cuts and relaxed regulatory oversight, boosting executives’ confidence in pursuing deals.
A series of rate cuts by the Federal Reserve have bolstered the U.S. economy’s resilience, though some worry President-elect Trump’s tariff proposals could push up inflation.
“How long the run can last and whether Donald Trump’s kind of neutrality will be a boon or a curse are likely to be questioned, but no one really thinks that a host of Wall Street banks have delivered strong, record-breaking profits yet to be answered,” Hewson added.
Still, mortgages and leases at Citizens, Truist and States have slumped and will likely remain depressed unless rates are lowered further.
The Fed, however, projected a smaller rate cut this year than previously expected. Inflation data released earlier this week showed that US consumer prices rose sharply in December, likely reinforcing this view.
(Reporting by Manya Sani and Niket Nishant in Bengaluru; Additional reporting by Arassu Kanagi Basil, Atharva Singh, Javier Singh Shekhawat, Vedant Vinayak Vichare and Prakar Srivatava; Editing by Maju Samuel)