Omar Hinojosa,
Taylor Advisors
Credit conditions are often indicators of the willingness of banks to lend that helps sustain, inflate, or deflate economic activity. When economists discuss changes in the federal funds rate, the most discussed relationships are unemployment, gross domestic product, and inflation expectations. Credit conditions are frequently overlooked! This session evaluates the federal funds rate, lending activity, asset quality trends, and net interest margin to see how your institution could be impacted during the next rate cycle. Preparing for these inevitable changes can often be a lengthy process involving evaluating historical experiences, credit concentration migration, and loan pricing disciplines. Implementing these steps is not only a best practice, but a necessary exercise in protecting value.
Learning Objectives and Key Takeaways
- How debt cycles and interest rates impact lending activity, asset quality, interest rates, margin, and ultimately, profitability.
- Where we currently are in the debt and rate cycle.
- Strategies to protect your institution from further ROA and ROE compression.