Positive earnings trends for large ‘global systemically important banks’ (‘GSIBs’) are helping ease the blow for large US and European banks, but we continue to avoid smaller regionals exposed to continued deposit outflows and commercial real estate lending. However, we continue to believe the ripple effects, including lower earnings for regional banks and a contraction in credit availability to small and medium size businesses, will continue to be felt in the US economy.
Bottom Line: We believe the worst of the ‘contagion risk’ seems to have passed, due to swift action by the Fed and Treasury.
