Neil Stanley’s Post

With the FDIC call report data now available for the 2nd quarter of 2024, we can now see that the median bank CD portfolio yield for the quarter was 4.16%, up from 3.96% in the previous quarter. The average CD yield in the U.S. for the quarter was 4.56% when you add up all the CD interest paid and annualize it compared to the average volume of CDs during the quarter. This is up from 4.48% in the previous quarter. This means that the banks paying higher rates had a significantly greater share of the volume. Bankers might want to check out our recent publication of the Term Funding Profitability benchmark at https://lnkd.in/gM_bHrq5 To explore the Pressure Gauge for your bank or your competitors use this link https://lnkd.in/eHWXGKZ. I'd love to hear from thought leaders like Ryan Rackley, Gregory Dushan, Jeff Marsico, Omar A. Hinojosa, CFA, Steve Wofford, Christopher Nelson, CFA, Chris Nichols, Dave McNab CPA, CA, Rutger van Faassen, Preston Afrank, Alisha Crafton, Michael Daidone, Gerard Colaluca, Beth Ericson, Boris Masip, MBA, Connie Loveland, Glenn Grossman, and Tom Grottke #banking #profitability #deposits #strategy

With the FDIC call report data now available for the 1st quarter of 2024, we can now see that the median bank CD portfolio yield for the quarter was 3.96%, up from 3.69% in the previous quarter. The average CD yield in the U.S. for the quarter was 4.48% when you add up all the CD interest paid and annualize it compared to the average volume of CDs during the quarter. This is up from 4.39% in the previous quarter. This means that the banks paying higher rates had a significantly greater share of the volume. Bankers might want to check out our recent article on moving the focus from rates to profits at https://lnkd.in/gWWx4w4B To explore the Pressure Gauge for your bank or your competitors use this link https://lnkd.in/eHWXGKZ. I'd love to hear from thought leaders like Jeff Marsico, Steve Wofford, Dale Sheller, Ryan Hayhurst, Omar A. Hinojosa, CFA, Christopher Nelson, CFA, Chris Nichols, Dave McNab CPA, CA #banking #profitability #deposits #strategy

The trading accounts of US banks topped $1tn in the third quarter Despite the jump in assets, executives and industry analysts say the banks’ trading businesses are significantly less risky than they were prior to the financial crisis. Nearly all of the trading activity in the US banking industry remains concentrated at the nation’s largest banks. The biggest is JPMorgan Chase, which had $506bn, roughly half the industry total, in its trading account at the end of the third quarter, up from $329bn at the beginning of the year, according to its FDIC filings. But all of the big lenders, including Citigroup, Bank of America and Wells Fargo, have boosted their trading assets this year, according to data logged with the FDIC. Trading accounts at Goldman Sachs and Morgan Stanley, which generate more of their income from Wall Street activity than lending, are the highest they have been in years. The biggest jump, for all the banks, has been in plain-vanilla equity holdings. JPMorgan’s stock market traders held $190bn in securities, more than double the $85bn they had at the beginning of the year. They say much of the activity that the big banks carry out is either on behalf of their clients or to facilitate client trades. Value-at-risk — or VaR — assessments, which estimate how much a bank could lose in the market in any one day, in most cases stand at levels that are half of where they were before the financial crisis. And while trading assets are up, they still only make up 4 per cent of the banking industry’s total assets, and about half of what they were as a percentage of assets back in 2008. (FT)

There are a number of community banks which are new to the world of "higher expectations" which comes with having a CRE concentration. Especially those banks which check most or all of the following boxes: - CRE concentration > 300% or Construction > 100% - 36-month growth rate > 50% - Over $1B in total assets (unofficial but trust me, it makes a big difference) - Elevated dependency on brokered deposits or FHLB advances Many of these banks checked one box at the most or not at all prior to the pandemic. Fast forward to 2024, and there is a new cohort of banks and their management teams which finds themselves in this position, but without the experience of knowing what is expected of them by regulators. Being reactive and waiting is ill adivsed and will guarantee you MRAs in the best case scenario and may even result in more punitive regulatory actions such as MOUs and consent orders. I will unpack some of the pain points associated with receiving MRAs. And you'll come to your own conclusions regarding the cost benefit trade off of the "wait and see" approach toward your next exam. Pain point number one, MRAs are a huge distraction to management and the board. MRAs create stress and anxiety. They typically come with a tight deadline, and the threat of, if you fail to meet that deadline or don't meet the MRA sufficiently, more regulatory action coming down the pike towards your bank. #communitybanks #banking #MRA’s #Capital Planning #CRE

The FDIC released data this month indicating that customers at major banks have been moving their cash out of low-interest-bearing accounts into high-yielding accounts in recent years, notably into CDs and brokered CDs. That's a sign of a healthy market. Despite rumblings of the Fed planning to lower rates, there's still time for savers to take advantage of high-yielding rates. https://lnkd.in/ed_PPSjH

BIG BANKS AND CUSTOMERS TO FEEL PRESSURE FROM HIGH RATES JULY 12TH 2024- JPMorgan and Wells Fargo report a drop in profit, while Citigroup’s profit rises thanks to cost-cutting measures By  Justin Baer... Updated July 12, 2024, 4:26 pm ET The fight to rein in inflation continues to weigh on some of the nation’s largest banks. Higher interest rates crimped their profits and left more consumers struggling to keep up with elevated borrowing costs. JPMorgan Chase JPM 2.49%increase; , the biggest U.S. bank, and Wells Fargo WFC 2.10%increase;  both reported a drop in second-quarter profit Friday. Citigroup  posted a rise in profit, driven in part by the bank’s cost-cutting measures, but set aside more provisions for potential losses in its credit-card business.   Banks of all sizes have struggled to adapt to the Federal Reserve’s faster-than-expected interest-rate increases. At first, rising rates boosted profits at America’s biggest banks, which were earning more on their loans while facing little pressure to pay customers more interest on their deposits. Yet competition for customers’ cash has heated up, crimping banks’ net interest income—the difference between what banks pay out on deposits and charge on loans. The rate increases also have squeezed some of the banks’ borrowers, causing them to fall behind on their loan payments. While Fed Chairman Jerome Powell signaled this week that a rate cut could come soon, the banks still have political uncertainty at home and abroad muddling their outlooks. “You might have heard,” Citi Chief Executive Officer Jane Fraser said on a call with analysts. “There’s an election in November.” Banks’ Stocks Close Down Shares in all three banks closed lower Friday. Wells Fargo’s shares had the steepest drop, closing down 6%, after the bank dimmed its outlook for the year. JPMorgan’s shares dropped around 1% and Citi’s shares dropped nearly 2%. JPMorgan’s second-quarter profit declined 9% year-over-year to $13.1 billion. That figure excludes one-time items, including a $7.9 billion gain on an exchange of the bank’s shares of Visa. JPMorgan’s reported net interest income rose to $22.7 billion, up 4% versus a year earlier. It was down from the previous quarter for the second period in a row, however, a sign that banks are having to pay up more for deposits. Wells Fargo, whose business mix leans more heavily toward consumers than its peers, reported a second-quarter profit of $4.91 billion, down 1% from a year earlier. The San Francisco-based bank predicted net interest income would fall between 8% and 9%. Citigroup, which is in the midst of a multiyear restructuring plan, showed signs last quarter that those efforts were bearing fruit. The bank reported net income of $3.22 billion, a 10% increase from the same period a year ago. Revenue rose to $20.14 billion, including a $400 million gain from the Visa share exchange. That marked a 4% rise from a year earlier...

In addition to its role insuring bank accounts for everyday Americans, the FDIC also tracks the overall health of the banking system. And one of the metrics in its sights – unrealized gains and losses on investment securities held by banks – continues to flash warning signs, just like it has for the last two-plus years. Simply put, unrealized losses on available-for-sale and held-to-maturity securities increased by $39 billion to $517 billion in Q1 2024, driven largely by higher losses on residential mortgage-backed securities. It’s the ninth straight quarter of unusually high losses in this column since the Fed began raising interest rates in 2022. Two takeaways here: - History tells us that significant unrealized losses can be a precursor to bank failures, as we saw during the 2008 Financial Crisis. Bank solvency and liquidity can be impacted if this goes on for too long. - Bank instability can spread to other financial entities, further destabilizing the market. Investors might flee to perceived safe-haven assets like gold, government bonds, and cash, causing dislocations in other asset markets and further increasing volatility. Whether or not this trend will continue remains to be seen, but the size of these unrealized losses should not be ignored. Nor should their potential to contribute to market volatility. #EyeonVolatility

Banks are again in particular focus on the US stock exchanges today. In addition to Morgan Stanley, Bank of America also provided fresh figures. The bank therefore had to accept a decline in profits in the second quarter. The markets still celebrated the numbers. They had expected even less profit. Bank of America had to hit the brakes in the second quarter. Higher operating costs and increased loan provisions caused problems for the bank. Total income year-on-year still rose by around one percent to $25.4 billion. The financial institution announced this on Tuesday in New York. Last but not least, Bank of America benefited from higher fees in investments and investment banking. Net interest income, however, fell by three percent to $13.7 billion. The bottom line was a profit of $6.9 billion. That was around half a billion less profit than the year before. However, analysts had expected an even greater decline. But that was more than analysts expected on average. Bank of America's operating costs increased by two percent to $16.3 billion. The financial institution set aside around $1.5 billion in the quarter for loan losses, more than a year earlier and also more than in the first quarter of the year. Boss Brian Moynihan pointed to increases in revenue from business customers, the wealthy and in the financial markets.