Tag: Bank Profitability

Why You Might Want To Copy Bank of America’s Safe Balance Account

Bank Account

After four years of testing, Bank of America introduced its “Safe Balance” account last week that is targeted at low-income customers and is set to compete against accounts at competitors that are based on a prepaid card. The account is designed to target those that cannot meet minimum balance requirements, carries a $4.95 monthly fee that cannot be waived and gives customers the ability to utilize online banking, mobile and bill pay.

 

How to Make Sure Your Liability Duration is Real

Liability management

Many banks have their certificates of deposits modeled on their asset-liability systems without optionality. That is, they treat the final maturity as gospel with little weight given towards repayment.  This could be a mistake, as just assuming the forward curve is accurate, CD’s are set to exhibit about a 20% shorter duration than modeled. In a rising rate environment, banks are short the option value of a CD and thus are exposed to a market loss in the form of opportunity cost should the investor redeem early.

How to Make A 15% ROE Making Loans at A 2% Spread (Or How To Get Out Of A Sinkhole)

Bank Lending

Listen, some bankers fear making loans below a 4% margin like I fear Florida sinkholes. To put that in context, I wear an avalanche transceiver whenever I am in the State. This makes bank meetings a little awkward, but gives me a fighting chance to be found when I get swallowed up. By the State’s own website, they refer to sinkholes as a “fact of life” which is why Florida is the only state where banks have to consult the “Sinkhole Clearinghouse” database before making a loan.

11 Rough Sketch About 10 Important Banking Facts

Banking Facts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The KBW Bank Index finished up 35% in 2013 - the most in 16 years. The S&P, by comparison improved 29%. Many banks were up more than 100%. 2014 looks good, but maybe not that good.

 

Bank Stock Performance

 

 

 

 

 

 

Developing An Endgame - What Drove Profitability in 3Q and Why Strategy Matters

What Drives Bank Profitability

In case your sports calendar was full this weekend, you might have missed the 2013 FIDE World Chess Championship. This is the most anticipated chess match in decades and, so far it is been a classic duel giving bankers insight into both strategy and tactics. The Championship pits The Tiger of Madras, Viswanathan Anand against Norway’s Magnus Carlsen.

The Heroes and the Hero Checking Account

The Hero or Public Service Account

On this Veteran’s Day our love and support goes out to all those Americans that have sacrificed or are sacrificing in order to protect this great land of ours. While many banks have a military, public service or “Hero Account” (which is what we call it here  at CenterState), more retail banks should. Not only is it a supportive thing to do, but it is also good business.

 

Renewed Loans Can Earn You More Income Than New Origination

Loan Renewals Are Often More Profitable Than New Originations

Many banks wait until the last possible period before renewing a loan. Waiting often invites competition, as other banks with loans out to that customer know exactly when other bank’s loans mature (hopefully you are capturing this information as well). To beat this problem, banks are smart to lock in renewals in advanced in order to minimize competition. Not only is a renewing loan likely a better credit risk (you have a payment history for starters), but banks can garner a larger spread making the risk-adjusted return more profitable. 

 

Trends: Charging Customers To Use Your Branch

Paying to Not Use the Branch

When it comes to checking accounts, one trend is to charge your customers to use your branch. The idea sounds crazy, but it is a very sane response to a difficult problem. There are a group of banks, most recently BBVA Compass that have introduced checking accounts such as their ClearConnect that has no monthly fee and free online/mobile banking, but comes with a $1 fee for each check processed, $1 fee for in-branch withdrawals and a $4 charge for each deposit completed in the branch after the first per statement cycle.

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