After the Fed’s first rate hike in over three years, Chris Whalen says higher rates, inflation and consumer pressure could raise banks’ credit costs by year-end. Most bank guidance signals slower Q3 trading, but Whalen expects it to remain positive for banks.
Whalen said bond-market moves had already affected bank stocks. The top 100 stocks his group tracks were barely up single digits this year after double-digit gains last year, with some posting triple-digit gains. He also noted credit costs had fallen for six consecutive quarters, despite expectations of a recession near the end of 2024.
Whalen highlighted consumer credit and commercial real estate as areas of vulnerability. He warned that energy prices could feed into food costs and reduce demand, potentially lifting credit costs; he said banks were not taking large credit losses in their commercial or markets businesses.
