Market Overview

Keefe, Bruyette, & Woods Comments On 'The Credit/Rate Challenge for Banks'

Related BAC
Stock Market News for June 20, 2017
Fast Money Traders Share Their Picks In Banking Sector
JPMorgan, BofA, Goldman, Citi Pass Stress Tests — Now Pay Up! (Investor's Business Daily)
Related WFC
Core Inflation, Retail Sales Falling: Should Banks Worry?
Top Research Reports for Verizon, Alibaba & Wells Fargo
JPMorgan, BofA, Goldman, Citi Pass Stress Tests — Now Pay Up! (Investor's Business Daily)

Keefe, Bruyette & Woods weighed in on the financial industry saying that credit costs are expected to increase. This comes a week after, "noise of big bank earnings" and an overall increase in net interest margins for the major players of the industry.

Analysts at Keefe, Bruyette & Woods wrote that, "at the end of the third quarter the U.S. banking system was under-earning on net interest income and overearning on credit costs… expectations were that higher interest rates would allow the net interest margin to recapture that shortfall prior to credit costs increasing. Since the beginning of the year, those expectations have been reversed—expectations for rate hikes have been pushed out and the fall in oil prices and rising credit spreads have increased expectations for higher credit costs."

As the costs of credit go up, money becomes more expensive, which could lead to less borrowing and thus less investments in the economy. This will pose a major challenge for banks such as Bank of America Corp (NYSE: BAC), JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co (NYSE: WFC) that rely on earning income from lending out their money. In the short-term, the anlyasts say that, "earnings estimate revisions for banks have been negative and we expect that trend to continue."

Latest Ratings for BAC

Apr 2017BerenbergDowngradesBuyHold
Apr 2017CitigroupDowngradesBuyNeutral
Feb 2017MacquarieUpgradesNeutralOutperform

View More Analyst Ratings for BAC
View the Latest Analyst Ratings

Posted-In: Keefe Bruyette & WoodsAnalyst Color Analyst Ratings


Related Articles (BAC + JPM)

View Comments and Join the Discussion!