Wrapup 1: US mid-sized banks ride industry upswing on robust fee income

Huntington Bancshares

17/01/2025 20:41

(Adds quote in paragraph 7-8, updates stock in paragraph 9)

        * 
      Mid-sized banks benefit from investment banking amid weak
loan
demand
    

        * 
      Analysts foresee 'Trump bump' boosting investment banking
sector
    

        * 
      Mergers among regional banks expected to accelerate
    

  
    By Manya Saini, Niket  Nishant
       Jan 17 (Reuters) - A raft of U.S. banks reported higher
fourth-quarter profits on Friday, extending a winning streak for
the industry as an upswing in capital markets alleviated a hit
from weaker loan demand.
Long believed to be the stronghold of Wall Street heavy hitters
such as JPMorgan Chase  JPM.N  and Goldman Sachs  GS.N ,
investment banking and trading have become increasingly vital
for mid-sized banks as a robust dealmaking environment offers
lucrative fee prospects.
    "Dealmaking is back with a vengeance," said Danni Hewson,
head of financial analysis at AJ Bell.
    The boost from investment banking has helped mid-sized banks
cushion the blow from lower loan demand as elevated interest
rates deter borrowers. 
    "If the incoming president follows through on promises for
deregulation and lower taxes, the outlook for 2025 will continue
to generate a lot of excitement among banking bosses," Hewson
said.
    Citizens Financial  CFG.N , Truist Financial  TFC.N ,
Huntington Bancshares  HBAN.O  and Regions Financial  RF.N  all
surpassed expectations for quarterly profits, according to data
compiled by LSEG, mirroring the stellar results of their bigger
peers this week.
    There are also expectations that mergers and acquisitions
among regional banks will accelerate. Huntington Chairman and
CEO Steve Steinour said dealmaking was not a priority, though.
    "We're not a significant acquirer. We may at some point
acquire a bank, or even a non-bank, if it strategically helps
us, and if it gives us distribution or product capabilities that
we don't have today, but that's not our prime priority,"
Steinour said in an interview.
    Truist shares were last up nearly 5% on Friday, while
Huntington stock was flat after rising 1% before markets
opened.  
On Thursday, U.S. Bancorp  USB.N  and M&T Bank  MTB.N  also
posted higher fourth-quarter profits, driven by higher fee
income. 
     
     
    'TRUMP BUMP'
    Analysts predict the investment banking sector will see a
"Trump bump" under the new administration due to corporate tax
cuts and relaxed regulatory oversight that could increase
executives' confidence to pursue deals.
A series of rate cuts by the Federal Reserve has also cemented
the resilience of the U.S. economy, though some are worried that
President-elect Trump's tariff proposals could lead to a spike
in inflation.
    "Questions may abound about how long the run can last and
whether Donald Trump's form of isolationism will be a boon or a
curse, but as a host of Wall Street banks delivered robust and
even record-breaking profits, no one is really thinking about
the answers just yet," Hewson added.
    Still, loans and leases at Citizens, Truist and Regions fell
and could remain depressed unless rates are lowered further.
The Fed, however, has projected fewer rate cuts this year than
previously expected. Inflation data released earlier this week,
which showed that U.S. consumer prices increased by the most in
nine months in December, could reinforce that view.

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Large-cap banks outperform equity markets, regionals lag    https://reut.rs/40jPwQf
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(Reporting by Manya Saini and Niket Nishant in Bengaluru;
Additional reporting by Arasu Kannagi Basil, Atharva Singh,
Jaiveer Singh Shekhawat, Vedant Vinayak Vichare and Prakhar
Srivasatava; Nupur Anand in New York; Editing by Maju Samuel and
Rod Nickel)
((Manya.Saini@thomsonreuters.com; X: manya__saini;))