The Institutional Risk Analyst

One reason that we believe that consumer loss rates are so low is that more aggressive lenders like HAPN and many others are ready and willing to provide unsecured financing to consumers. Given the signs of stress we see building in the private residential loan channel, we'd be more inclined to take the short side of HAPN -- especially if they are so anxious to take risk in home improvement lending.

In Q1 2026, the top seven banks continued to see asset returns decline, but funding costs fell even more. Net interest margin (NIM) decreased from the prior quarter to 3.31 percent, but loan growth driven by AI nonbank lending continued, rising 7.1 percent from the same quarter in 2025.

We infer the size of the NDFI portfolio of individual banks by subtracting the aggregate NDFI series of the FDIC from Other Loans & Leases. In 2010 when the FDIC first started gathering the data, NDFI loans were less than a quarter of the “other loans and leases” (OLL) category, but today they are 60% of OLL and growing fast.

In simple terms, FLG is not making money and does not seem to have any immediate prospects to pull itself out of a slow downward spiral of balance sheet shrinkage and operating losses. Whereas before 2024, FLG was a peer performer in most respects, today the bank’s financial performance is significantly below-peer, bottom quartile in many cases.

WFC is not even out of dodge yet, but TD has cut off the fingers of one hand in yakuza style and is now headed for years of misery

If we assume that asset returns will continue to rise, but that bank funding costs will rise 5x asset returns, then US banks have a problem

Total noncore funding at GS was over $700 billion at the end of Q1 2022 vs $321 billion for MS.

Valuations for the top five US banks are up slightly as Q1 2022 comes to an end

Among the ten largest mortgage specialization banks, NexBank had among the best equity returns in Q3 2021