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High Inflation, Rising Interest Rates to Boost US Commercial Bank Revenues
News provided byThe Freedonia Group
Sep 28, 2022, 10:17 AM ET
Interest revenue growth will outpace noninterest revenue
CLEVELAND, Sept. 28, 2022 /PRNewswire/ -- US commercial bank revenue is forecast to grow 5.8% annually in nominal dollars through 2026, according to Commercial Banking: United States, a report recently released by Freedonia Focus Reports. Banks will benefit from growth in economic activity and advances in consumer and business incomes to 2026. Gains in interest revenue are projected to outpace noninterest revenue due to rising interest rates as the Federal Reserve attempts to tackle the high inflation experienced in 2021 and 2022. In addition, higher inflation rates will increase the nominal value of loans sought and interest payments. However, inflation over the forecast period will reduce the value of loans and leases already held by banks.
Commercial bank assets are forecast to expand 5.0% annually to 2026. Advances will be driven by projected increases in loans and leases in addition to inflation pushing up asset values. The expected rise in interest rates will help generate higher returns on bank assets and contribute to growth.
The value of gross loans and leases is projected to rise 5.8% per year to 2026. Demand for loans and leases is expected to benefit from projected growth in GDP to 2026, despite declines in GDP in the early forecast period. In particular, issuers of real estate loans are projected to benefit from the continued growth forecast for residential and nonresidential investment in structures. Lending to the commercial and industrial sector is expected to advance based on rising equipment investment as manufacturing output continues to expand. Increases in disposable personal income will bolster personal spending and drive demand for consumer financing. Inflation during the forecast period will also add to growth in the value of gross loans and leases.
These and other key insights are featured in Commercial Banking: United States. This report forecasts to 2022 and 2026 the following measures of the US commercial banking industry in nominal US dollars:
- interest revenue
- noninterest revenue (e.g., fees)
- net loan and lease charge-offs
- net income
- gross loans and leases
In addition, credit union revenue is forecast in nominal US dollars to 2026.
To illustrate historical trends, the measures of commercial banking noted above and credit union revenue, as well as the number of respective firms, establishments, and employees, are provided in annual series from 2011 to 2021. In addition, segmentation for commercial bank assets, gross loans and leases, and deposits is provided in annual series from 2011 to 2021.
The scope of this report covers the commercial banks, the commercial banking subsidiaries of bank or financial holding companies, and the savings institutions (also known as savings and loans, or thrifts) that are insured by the Federal Deposit Insurance Corporation (FDIC). Credit unions are not insured by the FDIC and are excluded from commercial banking figures, but a separate overview is provided in the report.
Financial institutions that offer commercial banking, investment banking, and insurance services are typically chartered as bank holding companies. The asset management and investment banking subsidiaries of bank holding companies are excluded from the scope of this report. In addition, stand-alone investment banks, insurance underwriters, mutual funds, and other investment entities or securities brokers are excluded.
More information about the report is available at:
About Freedonia Focus Reports
Each month, The Freedonia Group – a division of MarketResearch.com – publishes over 20 new or updated Freedonia Focus Reports, providing fresh, unbiased analysis on a wide variety of markets and industries. Published in 20-30 pages, Focus Report coverage ranges from raw materials to finished manufactured goods and related services such as freight and construction. Additional Services & Industries reports can be purchased at Freedonia Focus Reports or MarketResearch.com.
Analysis is intended to guide the busy reader through pertinent topics in rapid succession, including:
- total historical market size and industry output
- segmentation by products and markets
- identification of market drivers, constraints, and key indicators
- segment-by-segment outlook in five-year forecasts
- a survey of the supply base
- suggested resources for further study
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SOURCE The Freedonia Group