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Industry Research
The following reports cover the Banking market as followed by our BestWeek
news publication. Complete access to all of our Special Reports & Statistical Studies is available to our BestWeek
subscribers. Visit our
NewsRoom for complete archives and advanced search features.
2008 Special Report: U.S. Banking 1st Quarter Interest Review. Yield Curve Signals Imminent Stagflation
The treasury yield curve spiked to its recent steepest levels in the first quarter of 2008 as liquidity concerns and aggressive Federal Reserve interest rate cuts were particularly influential in driving down short-term yields.
Date: 4/21/2008 Pages: 5 Available:
Spreadsheet Data
2008 Special Report: U.S. Banking Issue Review. Subprime Losses More Prevalent Among Largest Institutions
As part of a deepening mortgage crisis going into 2008, a spate of earnings hits resulting from subprime exposures dominated the fourth-quarter 2007 results of U.S. banks.
Date: 3/28/08 Pages: 6 Available:
Spreadsheet Data
2008 Special Report: U.S. Banking Regulatory Review. Banks, Lenders Urged To Do More for Troubled Mortgage Loans
As more homeowners face foreclosure, regulators and lawmakers have urged banks and lenders to modify upwards of 1.8 million hybrid adjustable-rate mortgages (ARMs) made to subprime borrowers. These ARMs will reset in 2008 and 2009 to interest rates that are substantially higher than market rates.
Date: 2/18/2008 Pages: 8 Available:
Spreadsheet Data
2007 Special Report: U.S. Banking 3rd/4th Quarter Interest Review. Risk Aversion Leads to a Steeper Yield Curve
Credit market sentiment shifted in the second half of 2007 to an overall aversion to risk, driven by the subprime mortgage crisis
and concerns over liquidity within the banking system. This led to a flight-to-quality to Treasury securities, driving down yields,
particularly for Treasury bills and two-year Treasury notes.
Date: 12/17/2007 Pages: 4 Available:
Spreadsheet Data
2007
Special Report: U.S. Banking Issues. Increased Bank Exposure to MBS Contributing
to Disorderly Markets
The impact of higher and more volatile interest rates,
combined with the banking industrys increased exposure to mortgage-backed securities,
may lead to more volatile assets and lower asset valuations reflected on the balance
sheets of U.S. banks.
Date: 8/27/2007 Pages: 4 Available:
Spreadsheet Data
2007 Special
Report: U.S. Banking Issues. Fed Pressured to Address Subprime ARMs
The woes in the subprime mortgage lending market have prompted lawmakers on Capitol Hill to pressure federal banking regulators to do something to address the issue. The Federal Reserve Board says it will do something though the boards governors say they dont quite know what theyll do yet.
Date: 7/2/2007 Pages: 2
2007 Special Report:
U.S. Banking Issues 2nd-Quarter Interest Review. Inflation Concerns Push Yield Curve Toward Normal Slope
After a year under water, the U.S. Treasury yield curve has resumed a normal, positive slope, with long-term yields higher than short-term yields. As viewed using six-month and 10-year Treasury securities, the yield curve turned negative June 2, 2006, nearly four weeks in advance of the Federal Reserves June 29 final tightening action of the last interest-rate cycle.
Date: 6/25/2007 Pages: 2 Available:
Spreadsheet Data
2007 Special Report: U.S. Banking Issues. Loan Margin Pressures Collide with Rising Credit Cards
The lending business of banks has been under pressure from thinning margins combined with rising credit costs, still another sign confirming the turning point of the U.S. banking industry cycle that A.M. Best believes began in early to mid 2006.
Date: 6/25/2007 Pages: 4 Available:
Spreadsheet Data
2007 Special Report: U.S. Banking Issues. Smaller Banks Are Better Prepared to Withstand Surge in Loan Delinquencies
Industrywide, smaller banks with assets less than $1 billion showed higher levels of ALLL, leaving them better prepared to withstand a surge in loan delinquencies than larger institutions
Date: 5/14/2007 Pages: 4 Available:
Spreadsheet Data
2007 Special Report: U.S. Banks Interest Rate Review, 1st Quarter. Mixed Economic Signals Hold Fed in Check
Despite year-end 2006 consensus forecasts that anticipated an early 2007 easing move by the Federal Reserve Boards Federal Open Market Committee (FOMC), federal funds still are targeted at 5.24%, and the FOMC appears to be on hold for the near term.
Date: 4/9/2007 Pages: 4 Available:
Spreadsheet Data
Non-U.S. Buying of
Treasuries Explains Inverted Yield Curve
Despite year-end 2006 consensus
forecasts that anticipate an early 2007 easing move by the Federal Reserves Open
Market Committee to stimulate a softening U.S. economy, lower interest rates are
far from a certainty.
Date: 12/29/2006 Pages: 4 Available:
Spreadsheet Data
Year-end Banking Summary for 2006
For the past couple of years, the U.S. banking industry has been managing successfully through
margin-compression pressures, benefiting from fairly stable economic conditions combined with
the banks ability to draw down on loss reserves and to resort to fee income sources.
Date: 12/15/2006 Pages: 8 Available:
Spreadsheet Data
Slowing Economy Threatens Credit Quality
While credit quality is still relatively strong, the trend may have turned toward deterioration in conjunction
with the onset of slowing U.S. economic growth, as suggested by the latest Shared National Credit data
published by federal bank and thrift regulators.
Date: 10/30/2006 Pages: 2 Available:
Spreadsheet Data
2007 U.S. Banking Issues: FDIC, Fed Disagree on Basel Implementation
As of late September, the federal regulatory agencies in charge of bank supervision seemed to have agreed on how to implement the provisions of the Basel Accord. Yet it seems regulators still have a way to go and they cant agree on how to get there.
Date: 3/26/2007 Pages: 1
2007 U.S. Banking Issues: Are Loss Reserves Adequate in Light of Rising Delinquencies?
A prominent feature of the U.S. banking industrys fourth-quarter 2006 results were noticeable increases from the prior quarter to other real estate owned and real estate charge-offs of 9% and 33%, respectively, and in emerging past-due real estate loans, which increased by 21%.
Date: 3/26/2007 Pages: 4
Market Review - U.S. Banking Issues: Shifting Balance Sheet Trends Heighten 2007 Banking Industry Risk Profile
A significant trend set by U.S. banking operations that stood out from other developments in 2006 was the sharp growth in commercial real estate lending - in particular construction and land development loans - funded increasingly by noncore sources.
Date: 1/29/2007 Pages: 2 Available: Spreadsheet Data
Federal Regulatory Changes Loom for Banking
Though it remains unclear what the Senate Banking Committee and the House Financial Services Committee may have in store for the banking industry in 2007, the federal regulatory agencies that oversee it are already on the way to ushering in several significant changes to how banks do business.
Date: 1/8/2007 Pages: 4
Non-U.S. Buying of Treasuries Explains Inverted Yield Curve
Despite year-end 2006 consensus forecasts that anticipate an early 2007 easing move by the Federal Reserve?s Open Market Committee to stimulate a softening U.S. economy, lower interest rates are far from a certainty.
Date: 12/29/2006 Pages: 4 Available: Spreadsheet Data
Year-end Banking Summary for 2006: For the past couple of years, the U.S. banking industry has been managing successfully through margin-compression pressures, benefiting from fairly stable economic conditions combined with the banks? ability to draw down on loss reserves and to resort to fee income sources.
Date: 12/15/2006 Pages: 8 Available: Spreadsheet Data
Slowing Economy Threatens Credit Quality: While credit quality is still relatively strong, the trend may have turned toward deterioration in conjunction with the onset of slowing U.S. economic growth, as suggested by the latest Shared National Credit data published by federal bank and thrift regulators.
Date: 10/30/2006 Pages: 2 Available: Spreadsheet Data
Record Consumer Debt Service Poses Risk to Commercial Banks: Household debt service in the United States rose to an all-time high in the first quarter of 2006, as measured against household disposable income, and is headed higher. This circumstance may portend developing quality issues for commercial banks' consumer loan portfolios, primarily of credit cards and home mortgages.
Loan Demand Helped Banks to Overcome Tighter Margins in Second Quarter: Margin compression pressures persisted through the second quarter of 2006 for U.S. banks, although the industry's aggregate net interest margin was unchanged as of the quarter ended June 30. Loan demand continued to trend upward, offering higher yield opportunities for banks and thereby offsetting the effects of a declining spread between short-term and long-term rates.
U.S. Banks' Non-Interest Income Enjoyed Healthy Growth in the First Quarter of 2006: Despite the Federal Reserve's ongoing rate-hike regimen, the U.S. banking industry reported record earnings in the quarter ended March 31, 2006, in part due to the strength of various sources of non-interest income. Although the Fed has boosted short-term rates by 425 basis points since June 30, 2004, the yield curve remains relatively flat.
U.S. Banks' Reliance on Large CDs Outpaced Other Deposits in the First Quarter of 2006: Recently, U.S. banks have become increasingly dependent upon more volatile liabilities, such as large certificates of deposits (CDs with balances of more than $100,000) to meet their overall funding needs, as the competition among financial institutions to develop funding sources has intensified.
Recently Proposed FHLB Regulation Creates Uncertainty For Many U.S. Banks That Rely on the System for Funding: For more than 70 years, the Federal Home Loan Bank System (FHLBanks) has been an important source of cost-effective funding and correspondent banking services for community-based financial institutions in the United States. A recent proposal by FHLBanks' regulator, the Federal Housing Finance Board (FHFB), has created uncertainty for the FHLBanks' members as to whether the current level of funding and services will remain available.
U.S. Banks' Earnings Reach Quarterly High on a Variety of Operating Tactics: U.S. banks ended the first quarter of 2006 with record earnings of $37.3 billion in aggregate (from an average of $33.9 billion in 2005), benefiting from higher fee income and lower loss provisions which offset a continuing trend of lower net interest margins.
Consumer Credit Sector May Start Slowdown in U.S. Banks in 2006: The U.S. banking industry has achieved record earnings over the past several years, in part due to the strength of consumer borrowing activity. Fueled by relatively low interest rates and strong price appreciation in residential real estate, the levels of mortgage and consumer debt have risen significantly.
Commercial Real State and Construction Loans Held By U.S. Banks Climb; Posing Powerful Risk to Earnings: Among the significant findings in U.S. bank 2005 filings was the continued climb in the most volatile segment of real estate financing. The industry's commercial real estate loans increased by 9.5% in 2005, continuing the trends of the past several years' growth rates of 10.3% in 2004 and 8.7% in 2003.
Commercial Real Estate Concentration Levels in U.S. Banks: A significant number of U.S. banks may find their commercial real estate lending activities under increased regulatory scrutiny if the proposed Inter-Agency Guidance on Concentrations in Commercial Real Estate Lending is implemented.
Structural Changes in U.S. Banks' Financial Statements at Year-End 2005: The fourth quarter ended Dec. 31, 2005, capped off a potential year of transition for the U.S. banking industry, as some of the key industry indicators turned less favorable.
U.S. Banking Industry Credit Card Charge-Offs Spiked in the Fourth Quarter of 2005: The latest bank regulatory filings released by the Federal Deposit Insurance Corp. showed consumer credit as the sector moving significantly against the industry trend of low asset credit cost.
U.S. Banking Trends for 2005 Signaling End of Peak Industry Cycle: U.S. commercial and savings banks are on track to close out 2005 with continuing solid trends in operating performance and balance sheet strength, based on recent fourth-quarter earnings releases and third-quarter regulatory filings
Net Interest Margins Remained Stable in the Third Quarter of 2005: In spite of rising short-term interest rates, the net interest margin for the U.S. banking industry in the third quarter of 2005 was relatively stable when compared with the prior quarter, dropping by only 1 basis point from 3.51% at June 30, 2005, to 3.50% as of Sept. 30, 2005.
U.S. Banking Industry Exposure to Real Estate Continues its Increase in 2005: Beginning in 2006, A.M. Best is initiating analysis and coverage of the U.S. banking industry, as it relates to the insurance industry, which is covered widely by A.M. Best.
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