U.S. banks weathered huge storms in the past few years, but bigger risks lie ahead as benefits from releases on loan loss reserves give way to a market environment where banks are forced to fight for new revenue and maintain profitability, Trepp said in its 2012 banking outlook report.
"Banks will earn less, putting 2012 a bit behind 2003 in terms of overall industry profitability," said the commercial real estate data analytics firm, which "does not expect 2012 to be a repeat of 2008, but there will be more disappointments than pleasant surprises in the new year."
Trepp said interest margins compressed in 2011, but the damage is mostly modest. Any benefit banks receive from loan loss reserve releases, which are the difference between loss provisions and charge-offs, will be gone by the middle of the year and account for 5% to 10% of net income next year.
Banks will rush to try and pick up new revenue by rolling out new fees, requiring higher minimum balances on deposit accounts and providing more incentives for customers to use their credit cards, Trepp said.
Read more...Trepp expects banks to face stronger headwinds in 2012 via HousingWire