Magazine article American Banker

Midsize Banks Wriggle Free from Margin Squeeze

Magazine article American Banker

Midsize Banks Wriggle Free from Margin Squeeze

Article excerpt

Byline: Harry Terris

Net interest margins at banks that have reported second-quarter earnings are showing the effects of the flattening of the yield curve at the hands of Federal Reserve easing and a flight to safety among investors.

Among the roughly 200 institutions, or 20% of publicly listed banks, that had posted results as of the beginning of the week, two-thirds showed quarter-over-quarter margin declines. The median contraction was 4 basis points, according to data from SNL Financial. Even so, a group of banks managed to buck the trend by employing a variety of levers by: redeeming high-cost trust-preferred securities made possible by the Fedas Basel III rulemaking; reducing rates paid on certificates of deposit; and deploying excess liquidity into loans and bonds.

Among the initial wave of companies reporting earnings, the aggregate net interest margin for institutions with assets between $10 billion and $100 billion ticked up 4 basis points to 3.45%. (The median increase for the size category was 1 basis point. Aggregate margins have been calculated as the sum of annualized net interest income for banks in the group divided by the sum of their average interest-earning assets.)

Broadly, the environment was poor for net interest margins in the second quarter. The escalation of the euro-zone crisis sent investors crowding into safe-haven assets and combined with signs of an economic slowdown to push yields lower. Operation Twist, in which the Fed has been swapping from short-term to long-term securities, also lowered rates further out on the curve. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.