Initially, this ability isn't that significant, but once you have a large number of Banshees, it becomes a major advantage. Imagine 40 Deaths surrounded by strong enemies, and you don't want to lose them, so you attack and use the ability to remove one unit. Later, they attack, and you might lose N units. However, if you have Banshees and use the ability, all enemies will take damage as if they were hit by ~20 Banshees each.

These are all your Necromancer fantasies.
Mournful Wail
This creature can deal damage to all living enemy units within a three-cell radius. The amount of damage depends on the enemy's morale and the distance to them (an activated ability).
Base damage = (10 - target's morale) for each Banshee in the unit. Units adjacent to the Banshee take full base damage, units standing one cell away take half, and units standing two cells away take only a quarter of the base damage.
For example, if 15 Banshees use the ability on a unit standing next to them and having a morale of 1, then (10-1)*15 = 135 damage will be dealt. And to a unit standing two cells away with a morale of -2, (10+2)*15*0.25 = 45 damage will be dealt.
The Wail is only effective if you are surrounded on all sides, preferably by high-level creatures, and there are many of them. This is an unlikely situation.

Now I choose Banshee names based on this ability, and let's not forget that all new creatures have higher damage, cunning, defense, or initiative than the old ones.

You're not paying enough attention. For example, a Banshee has lower attack, defense, and damage than a Herald, but it has more hit points. In general, the Necromancer's alt is not very interesting.