Financial Institutions Market Overview Q4 2016
The Scott-Macon Financial Institutions Group has released our Fourth Quarter 2016 Financial Institutions Market Overview of the commercial banking and insurance services space for what was, admittedly in hindsight, a remarkable year.
Expectations for generally higher interest rates and a steeper yield curve have been rising since the November election of Trump and the Republican sweep of Congress, while the Federal Reserve has signaled three more interest-rate increases for 2017. In addition, looking ahead towards 2017-18, a less onerous regulatory environment under a Trump administration could allow banks and insurers to boost profits and capital returns to shareholders.
Our positive outlook over the next eighteen months for accelerating activity levels and improved operating performance in most areas of the financial services segment, which we believe could boost commercial bank and property-casualty insurer return on equity and after-tax earnings 15 -20% over the 2017/18 time frame versus the year just-ended performance in 2016, reflects:
- Continued Steepening yield curve;
- Less onerous/roll back of banking regulations, including parts of the Dodd-Frank Act;
- Lower corporate tax rates;
- Accelerated loan growth and investment returns;
- Contained credit costs; and
- Continued reduced expense levels;