The Institutional Risk Analyst

New York | A year ago in The Institutional Risk Analyst, we predicted that net interest income for the US banking industry would flatten out and decline around Q1 2019. Sure enough, that is precisely what has happened. We wrote in The IRA Bank Book for Q1 2019: "The cost of funds for US banks continues to grow at four times the rate of interest income, suggesting that the net-interest margin earned by banks may start to decline in 2019. Rising funding costs are being felt

“Stock prices have reached what looks like a permanently high plateau.” Irving Fisher Autumn 1929 New York | Is the free ride over for financials? For the past decade, banks and other leveraged players have basked in the warm embrace of artificially low interest rates and not quite so low yields on various asset classes. The just completed cycle of Q1 2019 earnings for public companies suggest that the outlook for financials may be a good bit less accommodating than the rec

New York | In the most recent edition of The IRA Bank Book, we note that the rate of increase in funding costs for US banks in 2018 was a bit over 70% year-over year. The rate of change in this key component of bank earnings is not particularly correlated to the broad swings in market interest rates and, by implication, investor confidence. But the normalization of bank funding costs is relentless. As we describe in some detail in the IRA Bank Book for Q1 2019, rising bank

New York | This past week, readers of The Institutional Risk Analyst awoke to see that banking exemplar Bank of the Ozarks (OZK) had taken a loss on two legacy loans on regional mall properties in the Carolinas. First and foremost, this event shows that commercial real estate many parts of the US have still not recovered from the 2008 bust. Bank OZK, as it is now known since shedding its bank holding company, had previously reserved for the write-down. Our friends at Kroll

“The great wheel of circulation is altogether different from the goods which are circulated by means of it. The revenue of the society consists altogether in those goods, and not in the wheel which circulates them” Adam Smith, 1811 Southport | This week in The Institutional Risk Analyst, we return to one of our favorite topics – namely credit spreads – as we consider the most recent statement from the Federal Open Market Committee. Fed Chair Janet Yellen made a presentation