Fitch warns US banks against political uncertainty

The U.S.-based credit rating agency Fitch Ratings warned on Friday U.S. banks against the possibility that their net profits and revenues will be under pressure in the fourth quarter of the year because of political uncertainties and low interest rates. The credit rating agency pointed to the positive balance sheets of U.S. banks in the third quarter, stating that the net profits and revenues obtained in this period will decline in the upcoming period.

According to Fitch Ratings' survey with the largest 17 U.S. banks, the credit rating agency expects the net profits and revenues of banks will fall in the fourth quarter because of the long-term low interest rates, weakness and low growth rates in the world's leading economies.

Fitch Ratings' statement underlined that political uncertainty reduced demand for commercial loans, having a negative impact on the growth of many U.S. banks' credit volume. This negative impact might also prevail in the last quarter of the year.

Pointing to the long-term low interest rates, the credit rating agency referred to the fact that large banks signaled in the third quarter that they might take cost-cutting measures. According to the statement, some U.S. banks need to take advantage of credit loss reserves because of growth slowdown. Meanwhile, three large banks, JP Morgan, Chase and Citigroup, strengthened their reserves with the improvement in consumer portfolio. Citigroup, one of the giant banks in the U.S.'s financial services and investment banking, announced that its net profits and revenues dropped in the third quarter of 2016 when compared to the same period last year.

JP Morgan, Chase and Wells Fargo also announced that their net profits fell, but net revenues increased in the same period. Bank of America, Goldman Sachs and Morgan Stanley achieved a rise in net profits and revenues in the third quarter.

Morgan Stanley achieved the highest rise of 57 percent in net profits in the third quarter year over year, while Goldman Sachs reached the highest increase of 19 percent in revenues in the same period.