US banking sector: quality assets are paramount

THE US banking industry suffered notable liquidity stress in 2023. The upheaval commenced with a run on Silicon Valley Bank in March, and set off a cascading banking crisis among regional banks in April and May.

By August, all three major rating agencies had downgraded several small to mid-sized US banks. Although large rated banks demonstrated financial resilience and favourable asset metrics, the industry as a whole only began to stabilise and rebound in the fourth quarter of 2023, prompted by the Fed’s indication of potential rate cuts.

As we enter 2024, the macroeconomic landscape that defined the sector throughout 2023 is anticipated to persist. This backdrop is characterised by sustained high inflation rates and intensified regulatory oversight.