U.S. banks poised for rosy year ahead: DBRS

“Looking forward, we expect improving loan demand, a steeper yield curve and deposit cost stabilization to bolster net interest income and net interest margins during 2025,” DBRS said.

“Indeed, a number of banks have guided to record net interest income for the year,” it added.

These expectations are underpinned by a relatively rosy economic outlook for the U.S.

“While considerable headwinds to the U.S. economy remain entering 2025, including a potential fallout from economic policy changes and/or ongoing geopolitical tensions, our growth outlook is generally positive,” it said.

At the same time, DBRS referenced, “underlying fundamentals pointing to forthcoming stabilization” in overall credit performance, with the potential for that metric to improve in 2025.

While the commercial real estate sector will continue to come under pressure, particularly for office properties, DBRS said that it expects “lumpy losses” in the sector. It expects limited impact on the banks’ credit ratings, “since most have manageable exposure, with substantial reserves already built.”

Alongside the positive backdrop, DBRS also expects bank regulation to weaken in the year ahead. The final Basel III requirements are now, at a minimum, “likely to be delayed and ultimately ‘watered down’,” DBRS said.

And, as a result, “we expect capital management activities to accelerate in 2025,” it said.

DBRS said that its rating outlooks for most U.S. banks are stable, but that, “if recent trends continue, there might be some positive credit rating actions during 2025.”