U.S. Banking Outlook 2025: A New Goldilocks Period for Banks?

We have released a commentary on our 2025 U.S. banking outlook.

Key highlights include:

-- Our outlook for the U.S. banking sector is relatively stable for 2025. We anticipate credit rating actions will likely be limited in scope, although more tilted to positive credit rating actions, given recent trend changes.

-- Net income in 2025 is likely to improve, reflecting revenue growth, ongoing expense initiatives, and muted provisioning needs as the economy remains sound.

-- We continue to believe U.S. banks possess strong balance sheets, with solid and stable levels of funding, capital, and liquidity.

"U.S. banks are likely to benefit from a more favorable operating environment, including a more constructive yield curve and a growing economy, which should lead to improved loan demand. Additionally, we believe bank credit fundamentals have outperformed our expectations when we published our 2024 outlook," said John Mackerey, Senior Vice President, Sector Lead, North American Financial Institutions Ratings at Morningstar DBRS. "Potential downside risks to our base case include the potential for interest rates to stay higher for longer than anticipated, which could put further stress on some consumers and businesses. Economic policy actions could trigger trade wars and hurt economic growth, and the ongoing geopolitical issues could escalate."