Investors and analysts will be interested in hearing about how banks are progressing in terms of lowering deposit rates as the Fed continues to reduce interest rates. They will want to know if banks have been able to reduce deposit rates without seeing any deposit runoff, as well as the expected deposit beta during a Fed rate cutting cycle based on the initial results they are seeing.
There will be interest in seeing if loan growth and loan demand are improving as rates decrease and borrowers get more confident in economic conditions, and how this is impacting loan pipelines. There will be interest in which particular sectors or asset classes are seeing stronger demand, and if banks are able to generate a higher level of loan production and loan growth without compromising on pricing and underwriting criteria. Investors and analysts will also want to know if CRE loan demand is increasing as investors seek to take advantage of still depressed pricing and property valuations.
With the fourth quarter being the first full quarter since the Fed started reducing rates, the trend in NIM will be very informative in terms of indicating which banks are better positioned to see NIM expansion as the Fed continues to reduce rates. Based on end of period spot rates for deposit costs at the end of the third quarter, many banks indicated they expected to see NIM expansion in the fourth quarter. There will be interest in seeing if the expected NIM expansion materialized and if deposit costs are coming down at a greater pace than any reduction banks are seeing in earning asset yields.
Asset quality will continue to be a key focus for analysts and investors with interest not just in NPAs, but in the trend in early stage problem loans as well and if migration in the portfolio is positive or negative. It’s also possible that some banks might choose to be aggressive in charging off or taking reserves on loans in the fourth quarter in a year-end clean up of the portfolio in order to position themselves to see improved asset quality and lower credit costs in 2025.
With economic conditions continuing to be challenging and many banks focusing on reducing expenses and trying to build capital, there will be interest in which banks are capitalizing on their stronger market positions and balance sheets to add banking talent. To the extent that a bank is benefiting from the current environment to add banking talent, they should indicate this to analysts and investors and make it known if the banking talent they are adding is helping them to expand or increase their presence in new industries or geographic markets.
As is customary for the fourth quarter earnings results, investors and analysts will be interested in hearing about the expectations that banks have for 2025. Given positive tailwinds for net interest income, net interest margin, and loan demand, there will be interest in hearing about how banks are thinking about the level of profitability improvement in 2025. There will also be interest in hearing about the priorities for capital utilization, and whether banks are still in a capital preservation mode, or if they believe their performance, capital position, and economic conditions are positive enough to consider being more active in repurchasing shares, increasing the dividend, redeeming more expensive preferred stock, or making acquisitions.
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