Q1 Bank Earnings Takeaways

First Quarter bank earnings clarified the new operating environment in 2022 in which loan growth will continue to be a key driver of earnings growth and valuation. Fund finance business lines can continue to be a material contributor in the year.

The quarter illustrated that a "higher-rates-good-for-banks" thesis for the year may be oversimplified. Instead, lower mortgage originations and the slump in capital markets activity drove revenue declines for the largest banks, while mid-cap players with less exposure to the two were able to drive top-line growth. The capital markets weakness had been well telegraphed prior to earnings, with Dealogic having reported a 35% year-over-year decline in publicly disclosed investment banking fees for the quarter and Refinitiv data confirming that 2022 was off to the slowest start in capital markets since 2019.