Thread: BANKS GO BEGGING!! (AHA!)

http://www.forbes.com/business/2005/08/ ... nking.html

Financial Services
The Banks Go Begging
Liz Moyer, 08.08.05, 6:00 AM ET

NEW YORK - It's an odd day when bankers go begging for assets.

But several deals in recent weeks highlight their conundrum: Booming deposit growth has outstripped loan demand, forcing bankers to scratch for assets that can help relieve some of the pressure from narrowing profit margins.

Much as been said about the shrinking gap between short- and long-term interest rates--what the banks call "the yield curve"--and that is partly to blame for the struggle to squeeze profits from lending. Intense competition for corporate and industrial loan business is another problem as banks cut deals and lower underwriting standards to win loan assignments.

"Big banks need asset generators, and corporate loans are just not profitable," says David Hendler, an analyst at CreditSights. "Consumer loans are needed."

What's so magical about consumer loans? They are short term, and their interest rates move quickly when the Fed takes action. Credit cards, home equity and auto loans have higher rates that create wider spreads to the deposits banks use to fund them.

Last month, Bank of America (nyse: BAC - news - people ) struck a five-year deal to acquire $55 billion of consumer auto loans from General Motors Acceptance Corp. (nyse: GMA - news - people ). In June, it announced a $35 billion deal to buy credit card lender MBNA (nyse: KRB - news - people ). Both moves were seen as a quick way to amass higher-yielding assets.

HSBC Holdings' (nyse: HBC - news - people ) U.S. consumer finance subsidiary just struck a deal to buy smaller credit card lender Metris Cos (nyse: MXT - news - people ) for $1.6 billion. Earlier this year, Seattle-based thrift Washington Mutual (nyse: WM - news - people ) agreed to buy yet another credit card lender, Providian Financial (nyse: PVN - news - people ) for just over $6 billion.

This month Puerto Rican bank Popular (nasdaq : BPOP - news - people ) got a deal to buy the online mortgage and auto lender E*Loan for $300 million.

Top executives at Charlotte-based Wachovia (nyse: WB - news - people ) are yearning to get back into the credit card business. Wachovia sold its operations in 2001, and the bank was believed to have been in the hunt for MBNA this year.

"There are a number of banks that are deposit rich but asset poor," says Christopher Wolfe, senior director at Fitch Ratings, which said Thursday the HSBC deal should boost the British bank by giving it more scale in a consolidating industry. What's more, Wolfe says, "specialty players bring a lot of marketing and IT" knowledge.

The scramble for assets isn't just limited to the biggest banks. Commerce Bancorp (nyse: CBH - news - people ) in Cherry Hill, N.J., recently announced plans to introduce its own Visa credit card, targeted for depositors. Commerce is widely praised for its adept consumer marketing, achieving deposit growth of 39% over the last five years, while loan growth has lagged at 27% for the same period.

Lending experts say the trend in favor of consumer loans should continue for the foreseeable future. Mortgage demand is strong, according to July Fed data. Commercial loans are also growing according to the Fed, though RMA, a credit industry group in Philadelphia, reports that commercial and industrial loans are not as robust as a few years ago because would-be borrowers still have enough cash on hand to fund operations.

The competition for loan customers, both consumer and commercial, could result in some credit losses down the road. The Office of the Comptroller of the Currency said last month that it is the first time in 11 years that it has seen a relaxation of underwriting standards for retail loans.

"It's an intensely competitive environment," said Pam Martin, the director of regulatory relations at RMA, an association whose members include bank loan and risk management executives. "Banks are under mounting pressure to achieve growth."

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But several deals in recent weeks highlight their conundrum: Booming deposit growth has outstripped loan demand, forcing bankers to scratch for assets that can help relieve some of the pressure from narrowing profit margins.

Banks pay depositors, on average, less than 1% interest these days, while loaning the same money out at 6% plus.

It seems like a profitable business to me.

Judy, what the hell is going on here? Banks begging? The greedist people on EARTH are American bankers. Hey, here is the joke around the O.R.
A banker and Osama Bin Laden are both drowning in the Trinity River in downtown Dallas. Only one can be saved. Bin Laden lives and I get the reward. The banker dies and I get into HEAVEN. Our personal conversation this past weekend lets you know what I think about bankers.
I tell you what. I heard Saturday that last month set a new record for new car sells. Well, DUH. Every company had that you pay what our employees pay crap going. ILLEGAL ALIENS bought most of those cars in Dallas County. They also bought alot of houses.

Judy, thanks to you, I am learning about business in America. I know the medicine deal, no problem. But you have taught me about BIDNESS!!!! I have learned more from talking to you over the last 90 days than I ever knew. You are a true blessing not only for ALIPAC but for this nation. It is women like you that built this nation. As a retired military officer, I am not NAIVE enough to believe that men built this nation. And I ain't talking about Army nurses either. Some of the best officers I served with were WOMEN. Behind every J. Paul Getty was a Judy. I love you, and you know that.

But this banking bovine drippings (gotta get by William best as I can) is just that. Especially the mortgage bankers. They are a whole criminal class unto their own. They have a special place in HADES For example the Rothchilds. These fatherless vermin financed both sides of the Civil War, WWI, WWII, and this current occupation. I know the problems that this current crop of generals is WORTHLESS. God Bless the Soul of Colonel David Hackworth. He was up for General if he only would have kept his mouth shut(google it). But he could not in good faith. That is why they don't care for him, Sixx, Colonel David Hunt, author of "They Just Don't Get It", and so many other officers and enlisted men. I was enlisted before I became an officer, so I knew the deal. But these "West Point Wonders" have no idea of what it going on. I guess I got astray of your point, but it is all one big HOAX.

IN the old banking days, the banks want deposits so they could make loans. In the old banking days, they wanted more deposits than loans. TODAY, they want deposits but they make their big money off loans they can sell off what they call flipping to a secondary market by selling the whole thing principal and interest over the 10 years, 15 years, 30 years at a discount. That is a big hit of cash within a short period of time after making the loan...no long haul to worry about...no long just collecting interest month by month (boring and costly).

Assets = Commercial Paper (Loans)

They don't make money on deposits...they have to pay money out.

They wants "assets" earning interest (profit) that they can sell off (flip out for a big profit all at once).

Think of it this way....banks sell commercial paper the way stock investors buy and sell stocks. That is how they survive today. That is what their "cost basis" and profit margins are based upon.

When they have more deposits than loans, they are PAYING OUT more than they are TAKING IN. See the problem? See how fragile they are?

They are in pyramid scheme mode....their costs are fixed; all those facilities; all those employees; all those executives; all that debt of their own they have to pay off; all their security; and software programs; etc. etc. etc. They can't pay for that with checking accounts and savings accounts...these cost them money...they pay for EVERYTHING with their loans and fees from debit cards and credit cards but all their "costs" are created through the "service" of checking accounts and savings accounts.

DON'T SPEND, SAVE!!

GET CASH, DO NOT USE THE DEBIT CARD (they make fees from every transaction from the vendor...no debits, no fees)

PAY OFF THE CREDIT CARDS ASAP!!

DON'T buy anything through the bank. No loans, no refi-, no home equity, no stocks, no money markets, no insurance, NOTHING.

JUST SAVE--DON'T SPEND!!

It will break the bank!! THEN, they'll starting wondering "where did we go wrong?" You flirted with other countries; you mistreated your American Customers; you funded National Council of La Raza; you dumped US for foreign aliens; you tried to sell out our country!! Tsk Tsk Tsk!!

You want to make loans in Mexico--be our guest!! In fact, why don't you just pack up and move on down there...and we'll start some NEW BANKS HERE IN THE GRAND OLE USA!! All it takes to start a bank is money...and we'll have OURS to start NEW BANKS WITH. Bu Bye Old Banks!!