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Stock Analyst Update

Banking Outlook 2022: Managing Rate Risk Is Key

Citigroup is not pretty, but it's our top pick

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As first-quarter earnings approach, we have taken a hard look at what 2022 might hold and how to think about the U.S. banking sector in today’s environment. We see strong core earnings fundamentals but valuations that already account for this. With an average price/fair value estimate of just under 100%, the banking sector today is fairly valued, in our view. 

While we see some headwinds for fee growth (deposit service fees, investment banking, and mortgages all retreating), we still expect strong overall revenue growth as loan growth returns and interest rates rise, driving strong net interest income growth. We also don’t see inflationary pressure playing out in expenses as much as some might expect.

Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.