I’ve been spending a lot of times on banks recently. If you’ve talked to me recently, it’s almost invariable banks have come up in the discussion. And even if you haven’t talked to me, I did a long post on the
I am an intermittent reader of your work and you do a very good job. Thanks. Regarding banks, I think there is a fundamental issue that you did not cover. Right now it is possible to get 5.25% on a 9 month treasury. Last time I looked US Bank''s loan portfolio yielded about 4.5%. About half their security portfolio is HTM so you know those have a low yields. On the funding side, banks have been living off very low paying CD's and demand deposits. As those mature and people wake up they will be fleeing banks in favor of money market funds and treasuries. This is like a vacuum sucking out the funding base of all banks and may create a real problem in the future. You would think loan rates would be increasing rapidly as bank loans are supposed to be floating but I did not see that happen at Usb in 1Q. They went up a little but not as much as short term rates. You thoughts???
I am an intermittent reader of your work and you do a very good job. Thanks. Regarding banks, I think there is a fundamental issue that you did not cover. Right now it is possible to get 5.25% on a 9 month treasury. Last time I looked US Bank''s loan portfolio yielded about 4.5%. About half their security portfolio is HTM so you know those have a low yields. On the funding side, banks have been living off very low paying CD's and demand deposits. As those mature and people wake up they will be fleeing banks in favor of money market funds and treasuries. This is like a vacuum sucking out the funding base of all banks and may create a real problem in the future. You would think loan rates would be increasing rapidly as bank loans are supposed to be floating but I did not see that happen at Usb in 1Q. They went up a little but not as much as short term rates. You thoughts???