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A revival in capital markets activity highlighted Wall Street’s first quarter results, signalling hope for improving conditions.

Fitch Ratings said in a report that while topline revenues and earnings were generally down in the first quarter for U.S. banks, the results contained signs of cautious optimism. In particular, “a long-delayed recovery in debt and equity underwriting was a particular bright spot,” boosting non-interest income at several of the big Wall Street firms.

“Regional banks with significant capital markets businesses also reported high single-digit fee growth [year over year],” Fitch said.

Despite expectations that rates may stay higher for longer, Fitch said net interest income came under pressure, declining on a year-over-year basis at most banks.

The banks continue to face an array of other challenges, Fitch noted, including rising deposit costs, weak loan growth, stress in the commercial real estate sector and an uncertain regulatory environment. “However, this quarter’s performance signalled the potential for near-term stabilization on all fronts.”

Most of the banks have managed to curb rising expenses, and Fitch expects that “lower compensation costs will slow expense growth over the remainder of the year.”

The banks’ exposure to commercial real estate also declined incrementally, and credit provisions for these exposures “were largely stable,” Fitch said. Additionally, the banks have maintained their capital positions “in anticipation of higher requirements, supporting further loss-absorption capacity.”