Comparing banking figures from 2022 to previous recessions reveals that the drop in industry performance was less drastic than in 2007 or 2020. Despite several
, the traditional definition found that the U.S. was not in recession in 2022. Many consumers did not feel that, though, as "recession" was among the top five most searched terms on Google in the United States in 2022. While not
, it signals that the recession was a hot a topic for many Americans. Indeed, the U.S. economy had seen better days, as reflected in the downtrend of
. But how does the banking industry perform during recessions? Were there any indicators in the banking sector in 2022 that could potentially signal an impending recession in the industry?
Industry performance during recessions
Recessions tend to take a toll on most key performance indicators of the banking industry. The 2007 financial crisis led to a drastic decrease in
the net income of the U.S. banking industry: In the fourth quarter of 2008, quarterly net income was negative 35 billion U.S. dollars. During the outbreak of COVID-19 in 2020, the industry's net income was three times less than in the previous quarter. 2022 also started with a negative
income growth rate but increased steadily towards the end of the year.
The asset growth rate of the industry paints a more alarming picture: The third quarter of 2022 was the fifth consecutive quarter with a decreasing growth rate, not to mention that it was lower than in 2007 or 2020. Another indicator of a recession is the increasing
share of unprofitable banks. During the 2007 financial crisis, unprofitable banks more than doubled. Between 2021 and 2022, unprofitable banks increased as well but slower than in 2008 and 2020. All in all, there were similar tendencies in the performance of the U.S. banking industry in 2022, 2020, and 2007. Most key performance indicators, however, showed a much slower decline in 2022.
The banker perspective
Most bankers in the U.S. had a negative view of the economy in 2022. Even though a recession was not officially declared,
most bankers believed the U.S. was already in a recession in 2022. Surprisingly, most bankers did not directly blame the ongoing conflict in Eastern Europe or COVID-19 but
instead looked at the overcorrection of Federal Reserve interest rates for an impending recession. Towards the end of 2022, more and
more bankers experienced worsening economic conditions for the banking industry compared to a year ago. In addition, most industry leaders predicted even further worsening
key financial indicators for 2023.
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Due to varying update cycles, statistics can display more up-to-date
data than referenced in the text.
