Fitch expects “weak performance” for US banks

International credit rating agency Fitch reported that it expects weaker financial performance for US banks this year, and that this performance may vary depending on business models, asset concentration, and the diversity and stability of deposits. In a statement, Fitch stated that the expectation of weaker financial performance for US banks in 2023 continues, in line with the outlook in November 2022. Noting that this performance will likely vary depending on business models, asset concentration, and the diversity and stability of deposits, the statement reminded that most US banks entered 2023 with strong profitability, asset quality, regulatory capital, and liquidity. The statement noted that this situation provides rating space to overcome near-term challenges. It was emphasized that when evaluating longer-term rating outcomes, there is an increasing focus on the second-degree effects arising from the bankruptcies of Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank. The statement noted that Fitch has taken several negative rating actions for banks that have been severely affected by recent bank failures and significant deposit outflows since March, and noted that the stable outlook of "AA" for most U.S. banks has not changed, but that specific issues for banks may continue to emerge. The statement noted that structural issues that may be longer-term and affect the ratings of U.S. banks continue to be evaluated. The statement noted that deposit outflows for U.S. banks have stabilized since the end of March, and that deposits at U.S. commercial banks fell 3 percent to $16 trillion through April 26. The statement emphasized that banks whose recent credit or deposit growth has been significantly above industry norms may be at greater risk of negative rating actions.