U.S. Banks 3Q23: Another Sound Performance in an Increasingly Complicated Environment

This commentary reviews 3Q23 results and outlook for U.S. banks.

Key highlights include:
• Consistent with our expectations, DBRS Morningstar-rated U.S. banks performed well in 3Q23 amid a challenging and increasingly complicated operating environment.
• The median DBRS Morningstar-rated U.S. bank generated a low, double-digit return on equity driven by strong, albeit declining net interest income.
• In the near term, we do not expect a significant amount of changes to our bank ratings, with 90% of DBRS Morningstar-rated U.S. banks having Stable trends

“Deposit outflows continue to stabilize, with a further shift in mix to interest-bearing balances or higher-yielding alternatives, while deposit betas increased at a more moderate pace. Management commentary from several banks indicated that net interest income is likely to bottom in 4Q23, which we consider reasonable.,” said Michael McTamney, CFA, Senior Vice President - Global FIG.