Outlook for Banks

Apollo Chief Economist

Our updated regional banking sector outlook is available here, and the weekly data shows a continued decline in loan growth in small and large banks, see the first chart.

The slowdown in loan growth is driven by Fed hikes and tighter lending standards following the SVB collapse.

With the Fed on hold until the middle of next year, these trends are likely to continue, and loan growth will soon turn negative.

Weekly Fed data shows small and large bank lending growth slowing after SVB
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist
Bank stocks since the SVB collapse
Source: Bloomberg, Apollo Chief Economist. Note: The KBW Bank Index consists of Bank of NY Mellon, Bank of America, Capital One Financial, Citigroup, Citizens Financial Group, Comerica, Fifth Third Bank, First Horizon, Huntington, JP Morgan Chase, Keycorp, M&T Bank, Northern Trust, PNC, People’s United Financial, Regions, State Street, Truist, US Bancorp, Wells Fargo, and Zions.
Funding costs for banks since SVB and FRB
Source: ICE BofA, Bloomberg, Apollo Chief Economist. Note: Unweighted average spreads of bonds from ICE 5-10 Year US Banking Index, C6PX Index for bonds issued before January 1, 2023. There are eight banks in the Regional index and 41 banks in the Diversified index. Regional banks include BankUnited, Citizens Financial, Huntington, and Zions. Diversified banks include JP Morgan Chase, Citibank, and Bank of America.
$1053 billion inflows into money market funds during this Fed hiking cycle
Source: FRB, ICI, Bloomberg, Apollo Chief Economist
Banks with total assets between $100 million and $10 billion are more exposed to CRE loans
Source: FDIC, Apollo Chief Economist

Banks from $1 billion to $10 billion have lower liquidity ratios
Source: FDIC, Bloomberg, Apollo Chief Economist

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