The Institutional Risk Analyst

New York | With the end of Q2 2019 earnings in sight, there is good news and bad news. The good news is that the rate of change in US bank funding costs is slowing, from 50-60% year-over-year rates of increase to 30-40% or so this past quarter. Indeed, even though the middle of the Treasury yield curve has essentially collapsed, there is no indication that funding costs are following suit. Interest rates in the US remain buoyant outside of the government bond market. Across

New York | We had a great trip last week, participating in Ellie Mae’s (ELLI) Experience 2019 and surveying the rich (and water sodden) agricultural sector due north of the Golden Gate Bridge. You may have seen the announcement that ELLI has agreed to a buy-out led by Thoma Brava for $99 per share. Suffice to say the valuation is well-above the 50-60% of book value that most of ELLI’s customers in the world of mortgage lending enjoy. That is, the few that are actually public

New York | Which are the best performing banks in the US? Equity returns for the entire industry averaged 11.4% in Q1’18, up from 9.6% for all of 2017. There are some smaller banks, however, that generated returns on equity (ROEs) far higher than the average. Large banks tend to significantly underperform smaller peers. Growth rates, margins and equity returns all increase as size declines. In this issue of The Institutional Risk Analyst, we look at some of the better perfo

Austin | Last week we heard optimistic noises coming from some of the top executives in the world of mortgage finance at the Americatalyst 2017 event. Falling interest rates have managed to get new applications for mortgage refinancing even with purchase loans for the first time in months, this as the 30-year mortgage has fallen back to pre-election levels. We're still calling for the 10-year Treasury to go to 2% yield or lower. The good news for Q3 ’17 earnings is that pro

New York | Earlier this week we appeared on CNBC’s “Squawk Box” to talk about bank earnings and the Fed. The results from the top-four banks – Bank America (NYSE:BAC), JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) – are really no surprise to readers of The IRA. The largest banks all beat small on revenue and earnings, but showed weakness on fixed income and the mortgage banking lines. We suspect that there will be even more pain on the mortgage banking

Since the November 2016 election, large cap financials have moved sharply higher, in the case of Bank of America (NYSE:BAC) up almost 60%. This spasmodic upward movement in reaction to the election of Donald Trump reflected both the collective desire of professional managers to increase allocation to financials but also the shared frustration of investors with the chronic under-performance of large banks. Let’s face it; there’s a whole generation of managers on Wall Street w

This week brings the start of Q1 2017 earnings for many banks, large and small. In order to better inform the subsequent prognostications, we borrow a line from the Passover Seder and ask: why is this bank different from all other banks? This question is not only important to understanding bank financial performance and earnings, but also to appreciate the subtleties of the evolving regulatory narrative in Washington around big banks and “too big to fail.” Last week, White