Monday, March 2, 2015

Biggest banks hoard billions they won't lend: UPDATE

"Cash piled up" at Citigroup and other big lenders "even as President Barack Obama beseeched bankers to lend more"

Biggest banks hoard billions they won't lend: UPDATE

"U.S. lenders, criticized for being too reckless in the past and too stingy in the present, have been sitting on as much as $1.29 trillion in cash, equal to a record 98 cents for every dollar of existing business loans," reports Bloomberg here.

"Banks are leaving more cash idle amid slack demand from borrowers throughout the economy and concern that regulators will require more liquidity to forestall another financial crisis. That’s crimping profit, and the result may be a drop in returns on equity by about 33 percent from pre-crisis levels, according to analysts at KBW Inc...

"Cash piled up even as President Barack Obama beseeched bankers to lend more and drive down the 9.7 percent jobless rate. Among the three biggest U.S. banks, the one with the highest ratio of cash to corporate loans is New York-based Citigroup Inc. -- whose biggest investor is the U.S. government with a 27 percent stake."

UPDATE: Bank "balance sheet (including loans) and revenue (fees, interest) growth are likely to remain elusive as long as economic activity remains low and regulatory uncertainty remains high," writes Janney Capital Markets analyst Rick Weiss in a report to clients today. Banks have recovered financially, but "populist legislative (and) regulatory proposals have... frosted (bank) business plans, including loan growth."

Or maybe it's just more profitable to lend money to the United States Treasury than to risk lending it to small businesses and other employers. Still, PNC, First Niagara (they own Harleysville National) and other regional banks are "positioned for significant revenue growth when the economy recovers," Weiss concludes. "Elite banks, moreover, will be able to exploit the financial crisis through fortuitous acquisitions." And yes, "higher interest rates are probable later this year."

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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