J.P. Morgan: Global Banks Weekly: US margins poised to recover as Brazilian credit and Australian costs face pressure

How long can US banks’ margin improvement last?

JPMorgan expects the average net interest margin of the US banks it covers to rise from 2.8% in 2026 to 2.9% in 2027. Net interest margin measures the difference between the interest earned on a bank’s interest-earning assets and its funding costs. The firm takes a more positive view of Valley National, expecting its margin expansion to continue through the fourth quarter of 2026 and into 2027, improving profitability.
The improvement is uneven: the firm expects Valley’s net interest margin to rise from 3.1% in 2026 to 3.3% in 2027, while Wells Fargo’s falls from 2.6% to 2.4%. JPMorgan believes that reasonably satisfactory results from small and midsize US banks would be enough to drive regional bank outperformance, but remains cautious overall.
Individual banks also face their own pressures: Huntington managed its balance sheet prudently in the third quarter amid competition, though integration and customer retention proceeded as planned; Flagstar revised its earnings per share outlook again, and problems with rent-regulated loans returned to focus.

Australian regulatory banking data for September 2026 show that business lending remains a bright spot, but growth in housing loans to investors has slowed. This means banks need to look beyond total lending and distinguish which types of customers are driving growth.
In its Australian bank earnings preview, JPMorgan highlighted competitive pressure on Westpac and its cost outlook for fiscal 2027; for National Australia Bank, it focused on capital, credit quality and an emerging shift toward cost reduction; for ANZ, it focused on whether it can continue cutting costs and restore revenue growth.

Several Indian financial institutions continue to grow: JPMorgan says AU Small Finance Bank has strong growth momentum and credit costs significantly better than company guidance; IndusInd Bank reported better-than-expected profit alongside faster growth and improved asset quality, and its rating was upgraded to neutral.
But the conditions for translating growth into profit vary. JPMorgan expects rising funding costs at Cholamandalam Investment & Finance to challenge its net interest margin; for AU Small Finance Bank, it identifies monsoon risk as an area of concern.

JPMorgan sees clearer signs of slowing loan growth in Brazilian bank data for September, and weak revenue could become a new concern; nonperforming loans remain broadly manageable, but some early signs of deterioration have emerged.
On valuations, the firm notes that Brazilian financial stocks’ valuation multiples have returned to their lows for the year, but expects earnings per share forecasts could be revised next, making it too early at the time to buy the dip. Low valuations need to be considered alongside changes in earnings expectations.