March 3, 2025 | Premium Service | Whalen Global Advisors (WGA) has published the latest edition of The IRA Bank Book (ISBN 978-0-692-09756-4), the quarterly outlook for the US banking industry. The highlights of the Q1 2025 report include:
The drivers of bank profitability in 2024 and the outlook for 2025.
Operating and credit metrics for the US banking industry
Detailed credit charts for major bank asset categories
Key risk factors chart illustrating growth of forbearance
“Industry results in 2024 were reasonably good, but the banking industry is still 200 bp below 2019 levels of asset and equity returns,” notes WGA Chairman Christopher Whalen. “Investors in bank stocks are paying more for less.”
The report notes: "While the published data from the industry is reasonably upbeat, we are mindful that there is an enormous amount of forbearance being applied to delinquent credits by banks, credit unions and private investors..."
The report notes that based upon multiples of book value, Wells Fargo (WFC) and U.S. Bancorp (USB) are the two most improved bank stocks in the past year, but that JPMorgan Chase (JPM) is “in another category altogether” because of that bank’s strong financial results.
Source: Yahoo Finance
Updated credit charts are included in the report showing the components of commercial real estate (CRE) loans and related data series including delinquency, net loss and loss-given-default, and aggregate exposure at default (EAD) for the industry. The report notes that loss severities on multifamily and CRE categories are now above pre-COVID levels, but well-below 2008 levels of loss. The report also details trends in unused credit lines in these categories.
“Loan loss rates in sectors such as autos loans and multifamily properties are finally rising, notes Whalen, “but with the exception of commercial real estate and multifamily assets, the rest of the real estate sector shows little stress. The real issue for 2025 is deposit growth and the Fed. Markets were expecting interest rate cuts and deposit growth in 2025, but that narrative has been put on hold by the election of Donald Trump and a significant revision of views by FOMC members."
WGA notes that bank stock prices soared in the second half of 2024, but the industry has retreated in the first two months of 2025. “The good news in Q4 was lower funding costs than yields, thus better NIM,” notes the report. “In Q1 2025, we may see the reverse, but because of falling yields rather than higher funding costs.”
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