Outlook for US Banks

Our outlook for the US banking sector is available here.

Banking sector balance sheets are generally in good shape, and credit growth is positive, driven by lending by large banks.

Delinquency rates are peaking on credit cards and auto loans, but restarting student loan payments is a headwind to credit quality and credit growth.

The trade war and Moody’s downgrade have not yet had any impact on the banking sector or credit growth.

Permanently higher interest rates are putting downward pressure on CRE prices for office, multifamily apartments, and healthcare facilities. This remains a problem for banking sector balance sheets.

Banks are more willing to lend, and this is an upside risk to consumer credit — Sources: Federal Reserve, Macrobond, Apollo Chief Economist

Delinquency rates peaking for auto loans — Sources: Federal Reserve Bank of New York, Macrobond, Apollo Chief Economist

Delinquency rates peaking for credit cards — Sources: Federal Reserve Bank of New York, Macrobond, Apollo Chief Economist

Credit card delinquency rates at small banks are much higher than at large banks — Sources: Federal Reserve, Macrobond, Apollo Chief Economist

US office: The nationwide price per square foot is down 40% from the peak — Sources: Bloomberg, Macrobond, Apollo Chief Economist

Download high-res chart book

M&A Activity Very Weak

Measures of M&A activity are approaching the lowest levels in decades, driven by the double whammy of high uncertainty for business planning and interest rates staying higher for longer.

The weak M&A environment will continue.

Why? Because unsustainable fiscal policy is putting upward pressure on long-end rates, while inflation is putting upward pressure on front-end rates, driven by tariffs, reduced immigration, and housing affordability boosting rental inflation.

The bottom line is that fixed income will continue to pay higher all-in yields to asset owners of credit.