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Financials Show Little Sign of Recession
BRIARCLIFF MANOR, NY / ACCESSWIRE / September 17, 2024 / Whalen Global Advisors LLC (WGA) has published the latest edition of The IRA Bank Book for Q3 2024, the quarterly outlook for the US banking industry. The highlights of the new report include:
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Income for the US banking industry continues to improve from the lows seen at the end of 2023 and the first quarter of 2024.
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Credit metrics continue to diverge as commercial real estate exposures deteriorate and consumer loss rates have fallen now three quarters in a row.
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The rally in market interest rates in August and September has provided banks an opportunity to take losses on COVID-era securities. We expected realized losses to grow in Q3 but the pain will be offset by gains in late vintage securities.
“There is no evidence of a consumer recession in the latest bank data,” notes WGA Chairman Christopher Whalen. “Also, there is little shrinkage in bank deposits after months of ‘quantitative tightening’ by the Fed because the central bank has not really allowed reserves to fall. Just changing the target for the Fed funds rate is not really an interest rate tightening.”
The report notes that the unprecedented negative loss severity on bank owned mortgages continues because of the 40% home price inflation during the Biden Administration. The net loss rate in Q2 2024 on $2.7 trillion in bank-owned 1-4 family mortgages was -25%. This means that the lender pays off the mortgage upon foreclosure and makes a profit of 25% of the original loan amount.
“The residential housing market has seen home prices rise dramatically since 2020,” notes Whalen. “Now the Fed is preparing to cut short-term interest rates, which will boost housing costs further. As we noted in our column for National Mortgage News, can the FOMC be credible on inflation if home prices rise double-digits next year? No way.”
Copies of the WGA report are available to subscribers to the Premium Service of The Institutional Risk Analyst. Stand alone copies of the report are also available for purchase from the IRA online store.
About Whalen Global Advisors LLC
Whalen Global Advisors LLC is a New York-based consulting, risk analytics and publishing company that focuses on financial institutions and global markets. WGA publishes The Institutional Risk Analyst (ISSN 2692-1812), including commentary on the capital markets, industry reports and company profiles. The company also publishes the WGA Bank Top 100 Indices, which track the stocks of the top US banks. For additional information, please contact us at: [email protected]
Contact Information
Chris Whalen
Chairman
914-645-5304
SOURCE: WGA LLC
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