Bank Watch: September 2023

This Interest Rate Environment Done Got Old

One of BankWatch’s favorite blues artists is Junior Kimbrough. In “Done Got Old,” Junior sings:

Well, I done got old

Well, I done got old

I cain’t do the thangs I used to do¹

You could say the same about this interest rate environment. Earlier in 2023, markets were expecting Fed rate cuts by late 2023; alas, this expectation missed the mark. Now though, as a higher-for-longer rate environment descends on the industry, perhaps banks cain’t do the thangs they used to do in a lower rate environment.

We had the good fortune to speak at Bank Director’s Bank Board Training Forum in Nashville earlier in September. Our presentation, Valuation Issues Post-SVB, focused on issues emerging from a higher-for-longer environment. Right on cue, the Wall Street Journal published an article entitled, “Higher Interest Rates Not Just for Longer, but Maybe Forever” arguing that the “neutral” interest rate that balances inflation and unemployment has risen.²

This article covers some implications of a higher-for-longer rate environment included in our conference presentation:

1. Funding Costs and Net Interest Margins

2. Growth & Capital Planning

3. Securities Portfolio Management

4. Credit Quality Risks

5. Mergers & Acquisitions Impact ...

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Also in This Issue

• Public Market Indicators

• M&A Market Indicators