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Many banks have been focusing on deposits in the current environment, building up these resources instead of taking on additional credit risk. This approach reflects a more conservative stance, as financial institutions are unsure when the Federal Reserve will opt to push its benchmark interest rates higher.
Burgeoning economic conditions
While there is no consensus surrounding when the central bank will increase these rates, most believe the economy will continue to strengthen, according to American Banker. Should business conditions continue to improve, this upward trend will put pressure on the Fed to bolster its benchmark rates.
When the central bank finally follows through with this long-awaited move, the change in policy should help push interest rates higher on a broader level. Any increase in these rates would increase banks' interest in deposits.
Banks seek deposits
Some of these industry participants are actively looking for deposits, including Phoenix-based Western Alliance Bancorp, American Banker reported. During a conference call set involving quarterly results, chairman and CEO Robert Sarver emphasized this desire and elaborated on the financial institution's current situation.
"We've got a lot of loan growth," he stated, according to American Banker. "We can make good loans at good yields, and we're going to focus more on the deposit side this year."
Webster Financial, based in Waterbury, Connecticut, has been going in the same direction, recently striking a deal to purchase JPMorgan Chase's health savings account business. As a result of this transaction, Webster Financial division HSA Bank will acquire deposits with an estimated value of $1.3 billion.
Currently, the company's deposits are on track to make up 42 percent of its $22.5 billion in liabilities this year, according to American Banker. This represents a sharp increase from the figure of 16 percent that existed one decade earlier. In addition, Webster Financial has been taking steps to trim debt with shorter maturity, CFO Glenn MacInnes stated during the most recent conference call.
Enhancing balance sheets
Webster Financial is not alone in changing up its balance sheet, as many bankers have been evaluating their asset sensitivity because of the uncertain timeline surrounding the Fed's interest rate hikes, American Banker reported.
Amid this situation, many financial institutions have been adding adjustable rate assets - including auto loans and home equity loans related to prime rate or short-term assets - to their current holdings.
Banks that are thinking about purchasing these debt types might benefit from speaking with Garnet Capital Advisors, a seasoned loan sale advisory that has such loans available.
Garnet Capital Advisors 500
Mamaroneck Avenue, Harrison, NY 10528
(914) 909-1000
info@garnetcapital.comGarnet Capital Advisors 500
Mamaroneck Avenue, Harrison,
NY 10528
(914) 909-1000
