When it comes to determining the value of a deposit base, there are three major components that drive franchise value: effective cost of funds, interest rate sensitivity (duration and convexity) and volatility.
Introducing a new product is always a head scratcher for bankers. How to price and how to create a promotional incentive are just two of the many difficult questions that bankers have to solve. For example, do you price a new service with annual fees or monthly fees? Do you introduce the product and offer a money back guarantee so there is no risk to try the new product or do you offer it free on a trial basis?
In a number of previous articles, we discussed important factors that community bankers should consider in analyzing hedging programs. We also listed the pros and cons of various hedge alternatives, and finally, we gave examples of some specific application of loan hedges currently used by community banks. In this post, we conclude our hedge series by highlighting borrowers’ common objections to using hedges and how community bankers that we work with deal with and overcome these objections.
In the past six weeks, the banking landscape has radically changed. Spreads, volume forecasts and the economics of banking have shifted. The outlook for loans credit, deposits, and fee lines are now all different than they were prior to the Trump Administration and banks that are not thinking through the next four years will find themselves being reactive. Most importantly, the mindset and catalysts within public psychology have changed which has caused new thinking within bank marketing.
In a previous blog, we described what factors community bank managers might want to consider in analyzing a loan hedging program for their specific needs. In that blog, we listed the pros and cons of using a hedge to control risk and increase profitability. We then wrote a follow-on article that analyzed the various instruments and strategies common in the bank hedging market to include swaps and other interest rate derivative instruments. We provided an in-depth
Banks that are looking to enhance their risk management practices should consider incorporating the concept of the velocity of risk into their enterprise-wide risk management practices. The topic is germane as with the rise of the Trump Administration and the growth of social media, a company or industry can wake up one morning and find out that they are in the cross hairs of a Tweet torrent.
In Part I (HERE), we got all Warren Buffet against the backdrop of Jimmy Buffet and explored how rising rates were starting to impact deposit balances. We questioned whether “surge balances” are in fact a thing and if they are, is this the time that we will see an exodus of balances move into other asset classes like fixed income, equities, real estate and capital spending.
The Federal Reserve held off in raising rates at its November meeting, preferring to assess the results of the presidential election and allow time to make further progress on their twin goals of full employment and price stability. Since that November meeting, the results of the presidential elections have convinced markets of future expected inflationary pressures resulting from fiscal stimulus in the form of tax cuts and increased government spending. Furthermor
If you are like most banks, you probably don’t have big dollars allocated in your budget for advertising and of those dollars, probably less is focused on digital and probably nothing invested in mobile. That would be a mistake as the performance of bank mobile advertising has dramatically improved over the last several years. “Mobile is eating the world” is a common refrain and many banks are pursuing a mobile first strategy where all other delivery pipes like call centers, branches, ATMs and online applications support mobile banking.
Here at CenterState Bank, we specialize in Florida. Now, Florida has a lot of things going for it, but it has at least two major things going against it. One is an unspoken rule that if you own a bar or restaurant with an open-air patio, you have to have some guy impersonating Jimmy Buffett on a stool wearing a flowered shirt singing for tips. These guys are everywhere, and if you live here, it gets old. The other major drawback is that hunting for the highest rate on your deposits is a national pastime only eclipsed by baseball and trying to stay out of sinkholes.
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