What's leading to the rally in financials - is it simply rate cuts or other factors?
Frank
Gerard Cassidy
Rate cuts are front and center - a steeper yield curve is very positive for lenders. If the Fed cuts 1-2 more times by June next year, we could see a yield curve similar to 20 years ago with Fed funds over 3% and positive slope of 75-100 bps.
Do banks need continued volatility for strong trading revenues, or are there other tailwinds like IPO market pickup?
Frank
Gerard Cassidy
IPO business could have strong Q1 next year due to government shutdown backlog. Lending should pick up - nominal GDP at 8% suggests loan growth could accelerate in 2026 based on historical 1:1 relationship.
Expecting more bank M&A? What regions or business lines, and what's the rationale for big banks acquiring smaller ones?
Frank
Gerard Cassidy
Bank M&A entering peak period - expected to remain strong in 2026. Deals driven by economies of scale. Regulatory environment very supportive - deals now close in 4-5 months vs 12-15 months previously.
Should banks be concerned about disruption from fintechs/AI or other players entering their space?
Frank
Gerard Cassidy
Banks have combated disruption for decades and remain profitable. They will embrace AI to improve efficiencies and make industry more profitable.