By almost any measure, the past few years have been good ones for U.S. regional banks: Loan growth, while having moderated in recent quarters, has been steady; net interest margins have widened; charge-offs remain near historical lows; and profitability has recovered nicely from its Great Recession trough. Recent changes to regulatory and tax policy, and favorable macro-economic conditions, are providing additional near-term tailwinds to bank performance.
But like all good times, these too will eventually come to an end – such is the nature of the cyclical U.S. economy. And if we are in the late stages of the current expansionary cycle, as many economists and stock market watchers suggest with increasing frequency, the time to prepare for the pressures – and opportunities – downturns typically bring is now.
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