After more than a year of booking strong profits on the back of the high interest they were able to charge on loans, banks are contending with a throng of challenges heading into 2024, including weaker loan growth and potentially tougher capital rules.
Rate cuts from the Federal Reserve later this year could ease some pressure on banks to raise deposit costs further. But some of the central bank’s policymakers have warned that elevated rates may need to stick around for longer to bring inflation down to its 2 percent target.
“We continue to see increasing the deposit costs. Barring an end to the quantitative tightening and significant rate cuts, banks will face deposit pressures,” said Rita Sahu and Megan Fox, banking credit analysts at Moody’s, cyprus-mail.com reported.
“For some banks struggling with high-cost funding, lower rates may help spread dynamics. In general, higher rates and a steep yield curve are good for banks,” said Macrae Sykes, portfolio manager at Gabelli Funds.