Outlook for Regional Banks

Apollo Chief Economist

There are two downside risks to the outlook for the economy and markets.

The first is rates higher for longer because of sticky inflation driven by high wage inflation and the ongoing recovery in the housing market.

The second is the ongoing tightening in credit conditions with banks holding back lending.

We are carefully monitoring both of these risks.

Our banking sector outlook is available here.

Source: FRB, Haver Analytics, Apollo Chief Economist
Source: Conference Board, FRB, Haver Analytics, Apollo Chief Economist
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 1st Jan 2023. There are 8 banks in the Regional index and 41 banks in the Diversified index, and Regional banks include BankUnited, Citizens Financial, Huntington, and Zions, and Diversified banks include JP Morgan, Citibank, and Bank of America.
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist. Note: March data as of 10th May 2023. Peak is defined as the month before monthly outflows turn negative.
Source: FRB, ICI, Bloomberg, Apollo Chief Economist

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