US Commercial Banking Revenue to Climb 3.8% Annually Amid Interest Rate Hikes

1/12/2017

Cleveland, January 12, 2017 — US commercial banking revenue is forecast to grow 3.8% annually to 2020. Gains in interest revenue are projected to outpace those expected for noninterest revenue. The outstanding value of loans and leases – a key determinant of interest revenue generation at a given level of interest rates – is set to continue increasing, driven by sectors such as real estate and consumer spending.

Banks will also benefit from expected increases in interest rates. However, the federal funds rate is unlikely to reach the roughly 5.0% peak observed in the 2006-2007 period by 2020, restraining faster gains in interest revenue. Releases from the Federal Reserve System following the December 2016 meeting of the Federal Open Market Committee suggest that the federal funds rate in 2020 is not likely to surpass 3.5%, which implies that the average bank prime rate is not expected to rise above 6.5%.

These and other key insights are featured in Commercial Banking: United States, a report recently released by Freedonia Focus Reports, a division of The Freedonia Group. The report forecasts to 2020 the following measures of the US commercial banking industry:

  • interest revenue
  • noninterest revenue
  • net loan and lease charge-offs
  • net income
  • assets
  • gross loans and leases
  • deposits. 

The scope of the report covers savings institutions (also known as savings and loans, or thrifts) and the commercial banking subsidiaries of bank or financial holding companies that are insured by the Federal Deposit Insurance Corporation (FDIC).

To illustrate historical trends, each measure of commercial banking is provided in an annual series from 2005 to 2015.

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  • segment-by-segment outlook in five-year forecasts
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