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Fitch: U.S. Banks' Revenue Challenges Clear in 3Q Results
October 23, 2013 / 4:15 PM / in 4 years

Fitch: U.S. Banks' Revenue Challenges Clear in 3Q Results

(The following statement was released by the rating agency) CHICAGO, October 23 (Fitch) Weak revenues for most large U.S. banks in the third quarter highlight the earnings growth challenges faced by the banking industry moving into 2014, according to Fitch. Ongoing reserve releases and cost reduction initiatives have helped offset revenue pressure to some degree, but a pickup in loan demand will be critical to driving any sustained revival in bank earnings growth over coming quarters. Significant declines in mortgage banking revenues and weak fixed-income trading results were the primary drivers of the reversal in the recent favorable trend in quarterly bank earnings. Loan growth remained muted in the third quarter, rising by less than 1% among banks that have reported to date. Quarterly mortgage originations fell off by roughly 17% on average for the largest mortgage originators, as the sharp rise in mortgage rates during the quarter (more than 100 bps) cut into borrower demand and home affordability. Banks continue to report improvements in asset quality and lower net charge-off (NCO) levels. However, we note that the rate of improvement is slowing somewhat. For example, nominal NCOs for banks reporting so far have declined by 13% sequentially in the third quarter, compared with 16% in the second quarter. Capital ratios continue to improve across the industry, reflecting retained earnings growth and relatively conservative payouts governed by the U.S. stress-testing process. For a complete review of third-quarter reported results for large U.S. banks, see "U.S. Banking Quarterly Comment: 3Q13," dated Oct. 23, 2013, at Additional insights into changes in bank fundamentals, as well as broader perspectives on third-quarter changes in measures of credit quality, can be found in "Fitch Fundamentals Index - U.S.," dated Oct. 16, 2013, at Contact: Julie Solar Senior Director Financial Institutions +1-312-368-5472 Bill Warlick Senior Director Fitch Wire +1-312-368-3141 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. Applicable Criteria and Related Research: U.S. Banking Quarterly Comment: 3Q13 (Revenue Growth Still a Challenge, Reserve Releases Buoy Earnings) here Fitch Fundamentals Index - U.S.; Index Trend Analysis 3Q13 here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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