这意味着，With the Federal Reserve likely to slow down the pace of interest rate cuts next year, higher rates are expected to expand Banks' net interest margins; incoming USA president Trump is also expected to ease regulations and scrutiny on the financial sector; Analysts surveyed by Institutions generally expect that revenues across all sectors of the world's top Banks (except for FICC Trade) will see the first growth since 2021 next year.
Global major banks are expected to have a lucrative year.
At the last FOMC meeting of this year, the Federal Reserve issued a hawkish signal, stating that due to inflation being stickier than expected, it is anticipated to cut rates only twice next year.
This means that the level of the US benchmark interest rate is expected to remain high for a longer period, which is likely to expand the banks' net interest margins, thereby supporting the lending and deposit business as the main source of revenue.
With expectations for rate cuts converging, banks are likely to continue benefiting from the widening net interest margin.
As the Federal Reserve may slow its rate cut pace next year, a steeper yield curve will continue to support banks' net interest income.
Visible Alpha's survey results of analysts also indicate that the revenues of the world's top banks across all sectors, excluding FICC Trade, are expected to see the first growth since 2021 next year. Furthermore, as of early December, the three-month US Treasury bill yield has fallen below the 10-year Treasury bond yield for the first time since 2022, which may soon spark new enthusiasm for Fixed Income products.
Also, analysts indicate that Trump's administration, which will take office next year, will relax regulatory scrutiny on the financial sector, which is also expected to bring tailwinds to the banking industry.
US Banks benefited from last year's high interest rate cycle. According to Visible Alpha, in 2023, when the Federal Reserve raised interest rates to historical highs, net interest margin grew by 11%, leading to a surge in revenue for large banks.
However, in 2024, due to major global central banks beginning to cut interest rates this year, the net interest income of the banking sector has been hit, with revenues from both commercial and wealth management businesses as well as Trade affected, and the performance of government Bonds and Other interest rate-related products has also been lukewarm.
Nevertheless, bank stocks performed well in 2024. Data shows that the ROI of bank sub-components in the S&P 500 Index and the Europe STOXX 600 Index reached 35% and 32% respectively, and if expanded to broader indices, the ROI was 25% and 6% respectively.
