The outlook for 11 other banks has also been switched to negative.
This comes amidst growing interest rate and asset liability management risks, as well as pressures on banks’ profitability. These factors are expected to affect the banks’ ability to generate internal capital, particularly as a mild recession is predicted for early 2024.
They anticipate a tightening of credit conditions and rising loan losses for us banks in the event of a recession. The firm also expects the recent increase in the Federal Reserve’s policy rate and the reduction in banking system reserves to put added pressure on the banks’ fixed rate assets.