Bank of New Zealand’s Post

Banking | Failing Banks, by S. A. Correia, S. Luck & E. Verner, as a NBER WP. "Failing banks are characterized by rising asset losses, deteriorating solvency, and an increasing reliance on expensive non-core funding." https://lnkd.in/dTSb8XuP

Discover key insights from the recent study on the Private Credit Market in Australia 2024 on Medium, presented by Gallantree. The article highlights the evolution of non-bank financial solutions and their growing importance given today's stringent banking regulations and favorable low-interest rates. Key contributors like EY and T. Rowe Price shed light on the significant growth projected for non-banks. https://lnkd.in/gs3w_3fw #PrivateDebt #PrivateCredit

ICYMI: In our recent report, “The Big Opportunity in Bank De-Risking,” TPG Angelo Gordon’s Structured Credit & Specialty Finance team examines the current dynamics in the U.S. banking sector and how they are impacting the opportunity set in the specialty private credit space. Check out this report and more from our Asset-Based Credit: The Post-Bank Era series here: https://lnkd.in/gtZPAT-E

Facing issues in Banking valuation? I have discussed about the divergence in the nature for the banking valuation in my previous posts but let me discuss something new here. For banks, the operating & financing decisions are not separate, and we use the Free cash to equity & not Free cash flow to firm because debt is a raw material for bank and not a source to run its operations. Let us discuss 1 such complication in banking valuation: Convergence of forward interest rates. Assume a bank that earns 100% of its revenue from net interest income (NIM) At normal yield curve scenario, the banks can take loan at 1% spread, invest in short term deposits by lending in long duration since long duration gives higher yield that short duration. Assume: 2 yr bond yield: 5% 1 yr bond yield: 4.8% 1 yr forward rate: (1 + 5%)^2/(1 + 4.8%)^(2-1)-1 = 5.3% It can be extended for future years. Cash flow to equity: Net interest income + (Change in equity) If the yield curve is inverted? Cash flow for the bank turns negative. The bank will have to issue additional equity leading to dilution or take more deposits by providing a higher interest rate over 1 yr treasury bond yield. How to avoid such risks? Entering interest rate swaps. Ideally, the rate on bonds should move in line with the treasury yield, or else it creates a basis risk leading to partial hedge. Such changes in the yield curve can affect the forward rates and produce fluctuations within the NIM. Treasury bonds are risk-free with no value addition, but interest is tax-deductible, hence for going for corporate bonds deem fit. What is economic spread? Imagine. A loan book for $2M, yield on corporate bond is 4% and treasury being 3.2%, Economic spread = $2M*(4%-3.2%)-tax Also, there is no difference between the developed and emerging markets when there is high volatility in the interest rates. For such continuous financial & conceptual updates, join the below group. https://lnkd.in/eP-nEgbS #banking #banknifty #valuation #finance #interestrates Aswath Damodaran Pawan Khatri, CFA Sonia Shenoy Madhav Kalyan Stephen Traynor Pathik Shah, CFA Kartik Rajpara Preeti Parashar Akshat Shrivastava

Creditreform Rating affirms ING Bank N.V.’s Long-Term Issuer Rating at A+ (Outlook: stable).   🔎Key Rating Drivers • Strong underlying profitability and improving cost efficiency, however, profitability should have peaked in 2023 in the current cycle • Low and stable impaired loan ratio, cost of risk normalized after significant one-off provisions for Russia-related exposures in 2022 • Satisfactory capital metrics, CET1 ratio supported by robust internal capital generation • Sound liquidity position Rating Report: https://lnkd.in/drCdPN2Y #Creditreform #Rating #ING #Banking #Finance

A helpful primer on how current dynamics in the U.S. banking sector are impacting the market opportunity in the asset-based private credit space. Check out the full report: https://lnkd.in/eGwdhpr8

Interesting insight on Q1 area banking conditions from the KC Federal Reserve Bank.

📊 **Banking Sector Update: Credit and Deposit Growth Rates are Converging** 📊 Both credit and deposit growth rates are now neck and neck at around 11.9% and 11.8% YoY, respectively, as of November 1st. This convergence brings a mix of challenges and opportunities for the banking industry. 🔹 **Key Highlights:** - Recent mergers of banks and regulatory measures are moderating credit growth. - Alternative investments are impacting deposit growth. - Converging growth rates could ease liquidity pressures on banks. What does this mean for your banking strategy? Let's discuss it! 👉 [Read more](https://lnkd.in/g_Ap8f64) #Banking #Finance #CreditGrowth #DepositGrowth #BankingStrategy #FinancialTrends #Economy

We have released our analysis of 1st quarter banking conditions. Here is an overview of the report: ➡️ Bank net interest margins declined further as a result of continued pressure on funding costs. ➡️ Balance sheets grew modestly during the quarter, as banks took on more liquid assets while loan growth slowed, funded by increasing deposit levels. ➡️ Credit conditions continue to show signs of deterioration with further upticks in past due and nonaccrual loans. To read the full report, visit https://bit.ly/3UQeEv7. #FederalReserve #Banking #Banks #Finance

Companies can expect further credit tightening from commercial banks. Green Zone Capital Advisors helps companies obtain capital when traditional bank financing is not an option. #bank #businessloan #workingcapital #economy https://lnkd.in/gYdMw2sg