Profitability of Commercial Loans at Banks May Increase as Demand for Commercial Loans Grows According to Latest Beige Book Report

Posted on June 3, 2016July 6, 2018 by Alan_Lee

Profitability of Commercial Loans at Banks May Increase as Demand for Commercial Loans Grows According to Latest Beige Book Report Profitability of Commercial Loans at banks Last week, the Federal Reserve released its latest Beige Book report, which summarizes opinions and anecdotal evidence on the economic activity in the Federal Reserve's 12 Districts. According to some of the commentary in the Beige Book, improving economic conditions mean that lenders can reasonably expect to see great...

Act Now to Fine Tune Your Commercial Loan Pricing Model for This Year’s Growing Demand

Posted on April 1, 2016July 6, 2018 by Alan_Lee

Act Now to Fine Tune Your Commercial Loan Pricing Model for This Year's Growing Demand Commercial loan pricing model It seems that each day brings another financial news article reviewing why the U.S. Federal Reserve Bank did not increase interest rates in March and anticipating an interest rate move to be announced in June or December. Indications of stable U.S. economic conditions continue to pile up, increasing expectations for a Fed rate hike before year-end. The recent US stock mar...

Commercial Loan Pricing Variables

Posted on January 8, 2016July 6, 2018 by Alan_Lee

Commercial Loan Pricing Variables Commercial Loan Pricing Commercial loan pricing is done for the smallest to the largest commercial loans. Every loan has a rate, duration, fees and other terms that define the price for that loan. Lots of variables to consider. Pricing should be based on a defined and defensible methodology. It also can be influenced by individual discussions between the relationship managers and their clients. In a market where the savvy borrowers can know more about ma...

Getting the Most From Your Loan Pricing Model

Posted on September 4, 2015July 6, 2018 by Alan_Lee

Getting the Most From Your Loan Pricing Model Loan Pricing Model Banks price commercial loans in one of two ways. They either calculate their loan pricing based largely on what their competitors are doing and what current market conditions seem to indicate, or they make use of a loan pricing model. Choosing which option to use may initially seem fraught with difficulty. Proponents of trend-based pricing may argue that a loan pricing model is not needed, especially if the bank has a hist...

How Profitable Are Commercial Bank Loans?

Posted on June 26, 2015July 6, 2018 by Alan_Lee

How Profitable Are Commercial Bank Loans? Interest Rate and commercial loan demand forecast Phill Rowley was once quoted in the newspaper as saying “Interest rates will go up, down or stay the same”. It was from an interview he had given and that is all the reporter wrote. He wanted to simplify it but the uncertainties in future interest rate moves have filled text books. We all know interest rates move; we don’t when and how much. Eventually US rates will start rising too. Forbes w...

How Does Economic Value of Equity (EVE) Help Banks Measure Risk?

Posted on March 6, 2015July 6, 2018 by Alan_Lee

How Does Economic Value of Equity (EVE) Help Banks Measure Risk? Economic Value of Equity (EVE) Banks typically employ a couple of methods to measure interest rate risk and to comply with banking regulations. The first is net-interest income (NII) which reflects short-term interest rate risk. The other is Economic Value of Equity (EVE), which analyzes long-term interest rate risk. An internationally accepted standard for determining interest rate risk is to stress-test EVE. ...

Commercial Loan Pricing Model Inputs

Posted on February 27, 2015July 6, 2018 by Alan_Lee

Commercial Loan Pricing Model Inputs Commercial loan pricing model Small business executives, financiers and even bank employees often have questions about loan pricing. How are commercial loan interest rates determined? Pricing at what the competiton is doing does not get you to the profitability goals of the organization. Why do they fluctuate so often? And why does one institution provide a different rate than another on the same asset? In fact, many people might be surprised to k...

CD and Money Market Interest Rate – Profitability at banks

Posted on February 13, 2015July 6, 2018 by Alan_Lee

CD and Money Market Interest Rate - profitability at banks With the economy expanding, the probability for the Federal Reserve to raise short-term interest rates in the first half of 2015 rises. Upgraded credit quality will accompany a healthier economy. Higher interest rates in a favorable environment mean bank performance should improve. Commercial and real estate loan demand will especially increase. The recent changes in bank fee regulation has lowered the income banks derive from...