Fitch Ratings has revised its overall rating outlook on the U.S. banking industry to stable, as it finds that financial stability is emerging at many institutions.

The rating agency reports that U.S. bank earnings and revenues “are still comparatively weak relative to pre-crisis levels and will likely remain pressured over the next few quarters”, however it also notes that collective quarterly net income for the largest U.S. banks was US$15.1 billion in the latest quarter compared to $7.6 billion in the same period last year.

Fitch expects bank core earnings “to continue to show slow but steady improvement” over the next few quarters. And, it says that its revised outlook is also supported by the stabilization of non-performing assets and vastly improved capital and liquidity positions.

Nevertheless, Fitch’s outlook is predicated on its view that “the economic environment will remain challenging with only modest U.S. GDP growth and elevated levels of unemployment over the near to intermediate term”. Additionally, it expects that some regulatory reform for the industry will ultimately be enacted.

While the industry outlook is now stable, Fitch stresses that it is mindful of risks associated with the ongoing sovereign debt crisis in Europe, as well as the budgetary pressures across many U.S. states and municipalities, which could pose new risks for banks in general.

IE