Loan spreads for C&I and CRE loans decreased slightly in February of this year from a month earlier, and they contracted further in March. We expect that spreads will continue to contract throughout the remainder of the year. The primary driver of declining loan spreads is the tax changes that passed into law at the end of last year. The vast majority of lending institutions have benefited from an approximately 30% reduction in their tax rate (or a reduction in the tax rate of the pass-through entity). The interesting question is this:
Tag: Tax Reform
The Tax Cut and Jobs Act of 2017 (TCJA) presented banks with a rare windfall. Of all the industries in America, banking is one of the most rewarded. Because of where banks sit in the economy, the gift of leverage, and the current strength in the economy, banks now have an extremely rare opportunity to place this new found wealth for long-term good. It is an opportunity not to be squandered. Being Valentine’s Day, there is little doubt your bank would like to show all of its stakeholders some love with your tax savings. The question is – where can it do the most good?
Let’s pick up where we left off in Part 2. In that post, we covered interest deductibility, provided a prioritized list of industries of where banks can make their largest impact based on profitability, and looked at how to advise companies with international operations. In this article, we wrap up the series by looking at how the new Tax Cut and Jobs Act of 2017 (TCJA) impacts net operating losses, tax impairments and different types of financing.
In Part 1, we discussed how the Tax Cut and Jobs Act of 2017 is the perfect medium to allow bankers to carry on a high quality, “Trusted Advisor” conversation with commercial clients. We covered how pricing will impact credit quality and loan pricing while highlighting the importance and method to have a conversation around deposits, balance timing, earnings and cash flow.
No matter your politics and no matter how you feel about the recently passed Tax Cut and Jobs Act of 2017 (TCJA), one thing is certain – the change has created confusion and anxiety across the households and businesses of America. As a result, the most significant tax overhaul since 1986 has created a near-perfect opportunity for banks to take a thought leadership position to speak with their clients as well as the media to promote the bank and its financial expertise.