Fallout From COVID-19 Will Reduce US Banks’ Earnings; Strong Balance Sheets Support Ratings

DBRS, Inc. (DBRS Morningstar) published a commentary analyzing the effects of the Coronavirus Disease (COVID-19) on the profitability of U.S. banks. DBRS Morningstar views the U.S. banks as well positioned to handle an economic shock given their current level of earnings and considerably improved capital, liquidity and risk practices post financial crisis.

Key highlights include:

-- Economic fallout stemming from the coronavirus will likely lead to declining profitability for U.S. banks.
-- DBRS Morningstar views the banks as well equipped to handle an economic downturn and notes that capital levels and liquidity levels are substantially higher than before the financial crisis.
-- At this time, we expect ratings to be unaffected. However, a prolonged and more severe economic downturn could pressure some ratings.

“Global fallout from Coronavirus Disease (COVID-19), including a slowing economy and sharply lower interest rates will lead to declining profitability levels for U.S. banks. This situation is quickly evolving and there remains a great deal of uncertainty of how the economic impact ultimately plays out,” said John Mackerey, Senior Vice President.

This commentary is available at www.dbrs.com.

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