Banking Spreads Narrowing--As I Predicted!

Last year I gave several presentations on the Future of Banking (AgFirst, Montana Independent Bankers, Arizona Bankers, Bank Holding Company Association, Massachusetts Bankers). One key predication: that banks trying to diversify away from real estate would narrow the spreads on commercial and industrial loans. How did that forecast turn out?

According to the Federal Reserve’s Senior Loan Officer Survey, more banks are narrowing spreads than tightening. The chart above shows large and  medium banks, but the trend is the same at small banks.

What should bank management do about narrowing? I favor a clear plan that identifies areas of loan growth opportunity (rather than a strategy of just cutting price). Hiring talent specific to the target niches may be necessary. Call me if you need help on your planning process.

What’s next in banking? Bring me in to speak to your bank directors and management team, and I’ll let you know.

www.businomics.com
“Dr. Bill Conerly is the consultant who connects the dots between the economy and business decisions. He holds a Ph.D. in economics from Duke University and was formerly Senior Vice President at First Interstate Bank.
Dr. Conerly is author of Businomics: From the Headlines to Your Bottomline—How to Profit in Any Economic Cycle (http://www.businomics.com/), which provides business leaders with a framework for understanding current economic news. He is co-author of Thinking Economics, a multi-media high school economics curriculum used in 24 states.”

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