Fitch: Improved U.S. Bank Results in 1Q Unlikely to Be Sustained for
Remainder of 2013
NEW YORK -- April 23, 2013
Earnings for U.S. banks generally improved during the first quarter although
these levels will be difficult to sustain over the remainder of 2013,
according to Fitch Ratings quarterly banking report. The first quarter is
generally the strongest period, and the industry still faces unpredictability
on capital markets revenues and earnings.
Revenues broadly fell for the large U.S. banks that have reported to date,
although reported net income improved on a linked-quarter basis for many
banks. Lower provision expenses and a concerted effort to control expense
growth offset lackluster top-line performance. As expected, a decline in
mortgage refinancing activities helped bank earnings. Fitch expects mortgage
revenues to decline industry wide in 2013 given lower refinancing activities.
For the top five U.S. banks, aggregate revenues in capital markets were 7%
below a strong first quarter 2012 (1Q'12) and 36% above the seasonally weaker
4Q'12 level. Capital markets remained a key contributor to overall revenues
for the top five at 35% of consolidated revenues, with fixed income and
currency and commodities activity the largest segments. Fitch notes capital
market revenues are inherently volatile from quarter to quarter and
susceptible to sharp declines in the event of difficult markets.
Despite ongoing nonaccrual trend improvement, Fitch remains cautious regarding
the large balance of accruing troubled debt restructurings (TDRs) on the
bank's books, which are included in nonperforming assets per Fitch's
calculations. Fitch also notes legal and regulatory costs remain elevated with
the ultimate visibility into lifetime losses still limited.
In February 2013, Fitch completed a peer review of 16 mid-tier regionals
banks. Fitch's mid-tier regional group comprises banks with total assets
ranging from $10 billion to $36 billion. The Issuer Default Ratings (IDRs) for
this group are relatively dispersed with a low of 'BB' and a high of 'A+'.
Also in February, Fitch affirmed the ratings of the four institutions included
in this review: Bank of New York, State Street Corporation, Northern Trust,
and Brown Brothers Harriman.
The full 'U.S. Banking Quarterly Comment: 1Q13' is available at
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research U.S. Banking Quarterly Comment: 1Q13
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Julie Solar, +1 312-368-5472
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
Christopher Wolfe, +1 212-908-0771
Brian Bertsch, +1 212-908-0549
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