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Banks to Deliver Strong Results as Focus Shifts to Growth Durability, Raymond James Says

Banks to Deliver Strong Results as Focus Shifts to Growth Durability, Raymond James Says

MT newswireMT newswire2026/10/06 17:02
By:MT newswire

01:02 PM EDT, 10/06/2026 (MT Newswires) -- US banks are likely to post solid third-quarter results, but headwinds from elevated funding costs and energy prices have put the focus back on growth durability, Raymond James said Tuesday. The results are expected to be driven by factors including healthy commercial activity, loan growth, diversified fee income and benign credit trends, the brokerage said. However, investors are debating whether banks can sustain profit growth in an environment where higher interest rates and energy prices, as well as intensifying deposit competition are clouding the outlook for net interest margin and net interest income, Raymond James analysts including Michael Rose said in a note. "We expect (third-quarter) results to be less about whether banks can produce another quarter of beats and more about whether management teams can provide credible and achievable 2027 outlooks," particularly around loan growth, funding mix and fee-income durability, among other factors, Rose wrote. Last month, the Federal Reserve raised interest rates for the first time in just over three years to combat sticky inflation. The central bank's so-called "dot plot" signaled that a further rate increase could happen later this year. Raymond James expects the Fed to tighten monetary policy again by 25 basis points in December. "For banks, the higher-rate environment is mixed: greater asset sensitivity, higher new-money yields, and continued back-book repricing can support NII, while rising funding costs, weaker affordability, and pressure on (accumulated other comprehensive income/tangible book value) create offsets," Rose said. Despite its constructive view on the banking sector, Raymond James has become increasingly selective given the gaps in banks' funding profiles, earnings durability and growth opportunities. Certain banking stocks' risk-reward profile has improved following a recent pullback, but "relative performance will increasingly depend on company-specific execution and the ability to translate heal

01:02 PM EDT, 10/06/2026 (MT Newswires) -- US banks are likely to post solid third-quarter results, but headwinds from elevated funding costs and energy prices have put the focus back on growth durability, Raymond James said Tuesday. The results are expected to be driven by factors including healthy commercial activity, loan growth, diversified fee income and benign credit trends, the brokerage said. However, investors are debating whether banks can sustain profit growth in an environment where higher interest rates and energy prices, as well as intensifying deposit competition are clouding the outlook for net interest margin and net interest income, Raymond James analysts including Michael Rose said in a note. "We expect (third-quarter) results to be less about whether banks can produce another quarter of beats and more about whether management teams can provide credible and achievable 2027 outlooks," particularly around loan growth, funding mix and fee-income durability, among other factors, Rose wrote. Last month, the Federal Reserve raised interest rates for the first time in just over three years to combat sticky inflation. The central bank's so-called "dot plot" signaled that a further rate increase could happen later this year. Raymond James expects the Fed to tighten monetary policy again by 25 basis points in December. "For banks, the higher-rate environment is mixed: greater asset sensitivity, higher new-money yields, and continued back-book repricing can support NII, while rising funding costs, weaker affordability, and pressure on (accumulated other comprehensive income/tangible book value) create offsets," Rose said. Despite its constructive view on the banking sector, Raymond James has become increasingly selective given the gaps in banks' funding profiles, earnings durability and growth opportunities. Certain banking stocks' risk-reward profile has improved following a recent pullback, but "relative performance will increasingly depend on company-specific execution and the ability to translate healthy balance-sheet growth into durable earnings and returns," Rose said. Raymond James downgraded its ratings on five banks, while raising those for four others. First Bancorp (FBNC) and ServisFirst Bancshares (SFBS) for a downgrade to outperform from strong buy, while Fulton Financial (FULT) moved to market perform from outperform. Hilltop (HTH) was downgraded to underperform from market perform and WesBanco (WSBC) to market perform from strong buy. The brokerage upgraded First Merchants (FRME), Old National Bancorp (ONB) and Prosperity Bancshares (PB) to outperform from market perform. Old Second Bancorp (OSBC) moved to strong buy from outperform. UBS Securities said Monday third-quarter earnings for major banks will unfold against a backdrop of rising Treasury yields, with earnings estimates of Goldman Sachs (GS) and Morgan Stanley (MS) sitting well below Wall Street's views. The earnings season for major US banks kicks off next week. Price: 60.26, Change: -1.53, Percent Change: -2.48
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