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On Monday, Keefe, Bruyette & Woods (KBW) shared insights on the banking sector’s growth prospects, highlighting a potentially muted near-term loan growth due to a cautious Federal Reserve, weak H.8 data, and reduced GDP forecasts. The research firm pointed out that banks like Cadence Bank (NYSE:CADE), First Financial Bankshares Inc. (NASDAQ:FFIN), and Bank OZK (NASDAQ:OZK) might face pressure if their outlooks are overly optimistic. However, KBW remains confident in the growth narratives of BOK Financial Corporation (NASDAQ:BOKF), Cullen/Frost Bankers, Inc. (NYSE:CFR), Huntington Bancshares Incorporated (NASDAQ:HBAN), Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), Western Alliance Bancorporation (NYSE:WAL), and Wintrust Financial Corporation (NASDAQ:WTFC), which are expected to maintain their growth guidance in the first quarter of 2025.
The analyst’s commentary also included a review of the banks most at risk versus those likely to be insulated from slower growth. Banks with the softest growth outlooks, such as CADE, OZK, and FFIN, are considered most vulnerable to a downturn in growth relative to KBW’s forecasts. On the other hand, KeyCorp (NYSE:KEY) and Wells Fargo & Company (NYSE:WFC) are seen as more protected from such risks.
KBW also addressed the impact of Moody’s updated economic forecast on banks’ reserve levels. Moody’s March outlook adjusted the 2025 GDP growth prediction to 1.9% from 2.2% and increased the 2026 unemployment forecast to 4.3% from 4.1%. While these changes are not expected to trigger significant reserve builds, banks are advised to adopt more conservative reserve models. In response to the economic uncertainty, banks may adjust their scenario weightings towards more adverse outcomes, potentially leading to modest allowance for credit losses (ACL) builds in the first quarter of 2025.
The firm’s analysis suggests that while some banks may need to build modest reserves in light of the revised economic projections, the impact on the sector is not anticipated to be substantial. The overall sentiment from KBW indicates a cautious approach to bank growth outlooks, with an emphasis on the strength of well-communicated growth strategies in the face of economic headwinds.
In other recent news, Wintrust Financial Corporation reported its Q4 2024 earnings, exceeding analysts’ expectations with an earnings per share (EPS) of $2.63, surpassing the forecasted $2.48. However, the company’s revenue for the quarter was $638.6 million, slightly below the expected $641.75 million. The net income for 2024 reached a record $695 million, marking an 11.5% increase from the previous year, with robust loan and deposit growth at annualized rates of 8% and 9%, respectively. Citi analysts revised their price target for Wintrust Financial, reducing it to $142 from $158, while maintaining a Buy rating, reflecting a cautious near-term outlook but confidence in long-term growth. They anticipate a stable net interest margin and project a 4.6% net growth for the first half of 2025. The commentary from Wintrust’s management on credit was positive, suggesting that current fee income and expense projections might be conservative if mortgage activity increases. The analysts highlighted the importance of low loan loss provisions in their optimistic earnings per share forecast. These recent developments provide investors with insights into Wintrust Financial’s performance and strategic direction.
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