BANKERS, RAISE YOUR LOAN YIELDS WHERE YOU CAN: In the first quarter of this year, the average loan yield at regional banks was 5.36% and the daily average fed funds rate was 4.52%, for a spread of just 84 basis points. At the end of the last interest-rate-tightening cycle, from the fourth quarter of 2018 through the second quarter of 2019, bank loan yields averaged 5.08% and the fed funds rate averaged 2.34%, for a spread of 2.74%. The low spread now is bad news, but loan repricing going forward is a huge opportunity. Bankers must be aggressive with loan repricings when it is possible.
Banks, start boosting your loan yields
By Thomas K. Brown,
BANKERS, RAISE YOUR LOAN YIELDS WHERE YOU CAN: In the first quarter of this year, the average loan yield at regional banks was 5.36% and the daily average fed funds rate was 4.52%, for a spread of just 84 basis points. At the end of the last interest-rate-tightening cycle, from the fourth quarter of 2018 through the second quarter of 2019, bank loan yields averaged 5.08% and the fed funds rate averaged 2.34%, for a spread of 2.74%. The low spread now is bad news, but loan repricing going forward is a huge opportunity. Bankers must be aggressive with loan repricings when it is possible.