Wisconsin Bankers Association’s Post

That is one of the most ignorant financial news headlines ever!! Financial Times, I expect better from you.    Loans and deposits are priced differently based on market demand for each. That’s the very essence of what banking is. For over a decade, Fed rates were near-zero and loan growth was weak, and banks were having a very hard time on margins.  Even as rates rose sharply in the last two years, most banks have had a hard time benefiting, stuck as they are with illiquid low-rate loans made during the previous era.  Last year saw some of these banks go under as deposits fled and investors woke up to their illiquid losses. And now, even as rates start going down, most banks might not be able to price deposits down as fast as the Fed cuts rates.  I will not hold my breath for the FT headline next year on how the banking system gave $1T back to the economy.     FT, this headline is undeserving of you.  Do better! #Banking #ALM #FT

https://lnkd.in/gQFRgshs Maybe a long overdue correction.🤔 Interest rates increase cannot be indefinite. Cost of funds is key to the propensity to borrow and interest servicing. Suppy side monetary policy or fiscal monetary regime to manage inflation driven by commodity, war, weather and real wage increase? Lets see how this ✍️out. thanks to CNBC

This shows the adequacy of current capital levels as the 31 largest banks passed the stress tests. The scenario was to test the ability to keep operating for two years with 55% crash in the stock market, 40% drop in commercial real estate value, and 10% unemployment. The regulators who want to require more capital are wrong. Banks as a whole are better capitalized than ever. The requirement for higher capital would impair banks, hurt small businesses, consumers, and damage the economy.

US banks made a $1tn windfall from the Federal Reserve’s two-and-a-half-year era of high interest rates, an analysis of official data by the Financial Times has found. Lenders got higher yields for their deposits at the Fed but kept rates lower for many savers, the review of Federal Deposit Insurance Corporation data showed. The boost to the US’s more than 4,000 banks has helped pad out profit margins.

Bankhawk North America The markets have been wrongfooted on the expected path of US interest rates, only modest cuts now expected this year. The banks will come under increasing pressure to allow businesses to benefit more from the higher rates. #corporatetreasury #cfo #afp #afp2023 #eurofinance #treasury

Charts galore in this article talking about what to watch for this earnings season. The two main headliners Unrealized Losses & CRE Losses. We also see an appearance of liquidity and credit card delinquencies. Given how much credit card balances have grown, do we see a larger impact on a smaller increase on delinquencies? "Banks are sitting on around $517 billion in unrealized losses on their balance sheets, according to data from the Federal Deposit Insurance Corp. The bank regulator said in May the amount has been 'unusually high' for nearly 2½ years." " [CRE] Delinquencies haven’t yet touched levels seen during the 2008 financial crisis. But a string of defaults this year on commercial mortgage-backed securities is prompting fears that the rate is likely to grow." "Although the banks are bringing in more in profits from lending than they were after the pandemic, they are starting to see the growth in that profit pool slow as the economy adjusts to higher interest rates." "One way that investors will be gauging the health of regional banks is their cash and liquid securities on hand. While big banks and regional banks used to have similar levels of liquidity, bigger banks have pulled ahead and have more funds on hand to manage a rapid drop in deposits than their smaller counterparts." "Some people are starting to fall behind on their credit-card bills, and delinquencies are showing in banks’ earnings. Analysts expect to see modest upticks in delinquency rates during the second quarter." #banks #rates #federalreserve #economy #deposits #loans https://lnkd.in/gTQWteVX

Announcing the new audio version of our monthly newsletter. There are a lot of strange things going on in the bank treasury world, and as always, bank treasurers know to prepare for anything. You have a yield curve that is inverted for the longest time in decades, and where the marginal cost to fund a loan makes it difficult to lend profitably. You have high interest rate volatility as reflected in the MOVE index that, like the inverted yield curve, has persisted for a very long time. None of these things are good for the bank treasury business. But, on the bright side, if you have cash to invest, an overnight risk- free rate from the Fed still cannot be beat, and if you are paid to do nothing, do nothing. As far as bank treasurers are concerned, a couple of rate cuts at the end of the year would be ideal for trends in their NIMs and NIIs this year. It could certainly help with AOCI recapture. Profits have been under pressure from rising deposit repricing expenses that bank treasurers see as just starting to crest. This month’s newsletter covers these issues and goes through some of the other key topics on the bank treasury agenda, from the Basel 3 Endgame to the fallout from the FHFA’s FHLB100. Read/Listen here: https://lnkd.in/eUzd_TET #federalreserve #sofr #Basel3endgame #yieldcurve #MOVEindex #AOCI #FHLB100 #fdic #depositbeta #bankaccounting

BofA earnings. More of a glimpse into higher for longer and it's impact on banking. NII down, charge offs up. "The second-largest US bank also said that net interest income, a key source of revenue for the bank, fell 2.9% to $14 billion in the first quarter of this year. NII, the revenue collected from loan payments minus what depositors are paid." "Bank of America's results offer another look at how US consumers and businesses are faring as the Federal Reserve leaves borrowing costs higher for longer" "The company's loan balances rose to $1.05 trillion at the end of the first quarter, up 0.3% from a year earlier and less than analysts' estimates of $1.06 trillion. Lending — a key focus for investors, with high interest rates making borrowing costlier — has remained "sluggish," CRO Borthwick said" "Charge-offs totaled $1.5 billion, up 26% from the last three months of 2023. Borthwick said that an increase in charge-offs on credit cards is largely a hangover from the previous quarter and is flattening out" "Total deposits rose to $1.95 trillion in the first quarter, up 1.2% from the previous three months" #banking #deposits #earnings #lending #credit

The Importance of Real-Time Stress Tests and Scenario Analysis for Asset Managers In today’s volatile market environment, real-time stress tests and scenario analysis have become indispensable tools for asset managers. While the Federal Reserve’s annual stress tests (see below GARP article) provide valuable insights into the resilience of the largest U.S. banks, asset managers must conduct their own tailored stress tests based on risk factors specific to their portfolios. This approach ensures that the needs and expectations of end investors are accurately targeted. For buy-side firms, performing these stress tests and scenario analyses enhances transparency and builds credibility. It allows them to demonstrate their ability to withstand adverse market conditions and manage risk effectively. Particularly for investors in Separately Managed Accounts (SMAs) and/or institutional portfolios, this practice provides assurance that their investments are being actively monitored and safeguarded against potential market disruptions. The need for real-time stress tests and scenario analysis has never been more critical. In the current environment, characterized by economic uncertainties, fluctuating interest rates, and evolving market dynamics, asset managers must be proactive in identifying and mitigating risks. These analyses enable asset managers to simulate various adverse scenarios and assess their potential impact on portfolio performance. This proactive risk management strategy not only protects the investments but also fosters greater confidence among investors. And by leveraging advanced risk analytics tools, asset managers can navigate the complexities of the current market environment and ensure the resilience and stability of their portfolios. Finally, a key point from the article below that is important - "Risk managers are advised to enhance stress testing infrastructure for better strategic planning and portfolio optimization." #marketrisk #stresstesting #businessintelligence #realtimeriskanalysis

Banks reported modest #deposit growth in the fourth quarter of 2023 as they encountered easing #funding price pressures and began to set expectations for deposit cost reductions when the Federal Reserve cuts #InterestRates. The median US public bank posted sequential deposit growth of 0.3%, according to earnings reports through Jan. 26 compiled by S&P Global Market Intelligence. The 20 largest by assets did a bit better with a median 0.4%, and the vast majority of those with at least $50 billion of assets added to securities holdings amid soft loan growth. Read the full article to learn more: https://ow.ly/k03a50QzMaq