WFC - Wells Fargo

[rranjan]

I don't think that NIM will fall drastically to take return on tangible capital in 4-5% range for any extended period.

 

Absolute level of interest is less important than difference between long and short term rates.

 

Econommy in Japan is totally different due to very low return on investment by businesses. Bubble was too big in Japan and due to different set up, cleaning up takes a long time there.

 

OK please enlighten me with numbers from WFC specifically and why the NIM would hold up better? 

 

You can look at history and NIM to make that judgement. Don't look at WFC, simply look at entire banking sector. You should be able to see something there.

 

How do you get a figure like NIM of 100 basis point for long term? If you are looking at drastical drop in short term interest rates by Fed then give it 2Q and you will see stablized stats and not when things are in flux. When it drops so quickly by a big margin then earnings in securities held by banks drops immediately.

[sleepydragon]

I can't simultaneously worry about their assets and capital taking a massive whack because of all the loan charges from the impending depression and also worry about their inability to ramp up lending for the last several years prior to said economic disaster or I will get a nosebleed.  Do you really want to book a bunch of "growth" for the years 2017 through 2020 if you think anything like what you are worried about is going to happen? 

 

They have a lot of expenses to trim even aside from the regulatory burdens.  This week Shrewsberry was already putting people on notice that cuts are coming.

 

You absolutely want growth right now. It is very unlikely that there will be net fixed capital formation on the bank end of this for a very long time. Thus, net loans across the system will very likely be muted to down over the next several years. You want to steal every relationship you possibly can in this environment and early before spreads begin to narrow dramatically for the shrinking pool of corporate borrowers. Too, on the bank end of this if loan demand starts to pick back up you want to be in pole position with CFO's/Treasurers of more companies. Wells is going to be forced to exit good relationships. It is hard to get back in once you volunteer out.

 

Too on the securities side a larger balance sheet is going to allow you to serve as the intermediary throughout markets. Listen to Daniel Pinto at JPM's most recent fireside chat. That scale you gain is invaluable and makes it very difficult to lose money in fixed income trading businesses.

 

We'll see how Wells does, but the asset cap in the current environment is similar to the death penalty for SMU (no, I'm not suggesting WFC will be a $0 or anything close to it)...you'll be able to field a team again, it is just going to be very badly hindered for a long long time.

 

Thanks for the interesting response.  I was thinking:  Ideally the asset cap will come off during the crisis (likely, as a regulatory reaction thereto) right when competitors are struggling with digesting all the loans they made during the last 3 - 5 years (e.g., citi ramping up unsecured consumer lending and becoming distressed again as they do every 5 years or so). 

 

Wells wasn't expanding to take on those beautiful golden west and countrywide customer relationships going into the last crisis either.  At least not until regulators went to them and begged them to steal Wachovia (but this time nothing as dramatic, just saying "cuffs are off boys, go lend!").

 

I personally don't want anything to do with trading businesses other than required to support the commercial banking operation.  Like Munger, I would only own WFC, BAC, or USB (maybe PNC) among the very large, network effect, money-supply banks and I kind of hate the former Merrill business, so that would be my last choice.

 

MTB is pretty good too.

They have more commercial loan exposures but they have been conservative and the new CEO is young and experienced

 

[ERICOPOLY]

Just look at the population pyramids for various countries and then the US and look at the US population pyramid back in 2007-2010. I am not of the opinion it’s 100% chance your scenario doesn’t happen but It seems fairly difficult given the population pyramid alone, if you want to remove the interest rate piece.

 

First, I honestly don't have an opinion about the population period.  So much is muddied.  For example, where does "the lost generation" play into this?  Not the WWI version, but the one financially devastated this century.

 

Just go to this site or any population pyramid site and contrast US, Japan, and India.

 

https://www.populationpyramid.net/united-states-of-america/2020/

 

"the lost generation" is just another factor.  The age demographics are the issue on what percentage of the population can be productive in society.

 

So the biggest pig in the python since the baby boomers is now aged 20 to 34.  Why is that worrisome from a demand for loans standpoint?  Over the next decade, won't they be having kids and spending?  To anyone who hasn't had a child, spending is what occurs after you have one.

[rranjan]

Changes in Monetary Policy and Banks' Net Interest Margins:

 

https://www.federalreserve.gov/econres/notes/feds-notes/changes-in-monetary-policy-and-banks-net-interest-margins-a-comparison-20190419.htm

[CorpRaider]

I can't simultaneously worry about their assets and capital taking a massive whack because of all the loan charges from the impending depression and also worry about their inability to ramp up lending for the last several years prior to said economic disaster or I will get a nosebleed.  Do you really want to book a bunch of "growth" for the years 2017 through 2020 if you think anything like what you are worried about is going to happen? 

 

They have a lot of expenses to trim even aside from the regulatory burdens.  This week Shrewsberry was already putting people on notice that cuts are coming.

 

You absolutely want growth right now. It is very unlikely that there will be net fixed capital formation on the bank end of this for a very long time. Thus, net loans across the system will very likely be muted to down over the next several years. You want to steal every relationship you possibly can in this environment and early before spreads begin to narrow dramatically for the shrinking pool of corporate borrowers. Too, on the bank end of this if loan demand starts to pick back up you want to be in pole position with CFO's/Treasurers of more companies. Wells is going to be forced to exit good relationships. It is hard to get back in once you volunteer out.

 

Too on the securities side a larger balance sheet is going to allow you to serve as the intermediary throughout markets. Listen to Daniel Pinto at JPM's most recent fireside chat. That scale you gain is invaluable and makes it very difficult to lose money in fixed income trading businesses.

 

We'll see how Wells does, but the asset cap in the current environment is similar to the death penalty for SMU (no, I'm not suggesting WFC will be a $0 or anything close to it)...you'll be able to field a team again, it is just going to be very badly hindered for a long long time.

 

Thanks for the interesting response.  I was thinking:  Ideally the asset cap will come off during the crisis (likely, as a regulatory reaction thereto) right when competitors are struggling with digesting all the loans they made during the last 3 - 5 years (e.g., citi ramping up unsecured consumer lending and becoming distressed again as they do every 5 years or so). 

 

Wells wasn't expanding to take on those beautiful golden west and countrywide customer relationships going into the last crisis either.  At least not until regulators went to them and begged them to steal Wachovia (but this time nothing as dramatic, just saying "cuffs are off boys, go lend!").

 

I personally don't want anything to do with trading businesses other than required to support the commercial banking operation.  Like Munger, I would only own WFC, BAC, or USB (maybe PNC) among the very large, network effect, money-supply banks and I kind of hate the former Merrill business, so that would be my last choice.

 

MTB is pretty good too.

They have more commercial loan exposures but they have been conservative and the new CEO is young and experienced

 

Oh yes, I like MTB too.  I was just thinking of the banks that are large enough to have an ownership interest in Zelle: The P2P payments service that processes higher dollar volume than Venmo and is faster and free. 

[erdospi]

Just look at the population pyramids for various countries and then the US and look at the US population pyramid back in 2007-2010. I am not of the opinion it’s 100% chance your scenario doesn’t happen but It seems fairly difficult given the population pyramid alone, if you want to remove the interest rate piece.

 

First, I honestly don't have an opinion about the population period.  So much is muddied.  For example, where does "the lost generation" play into this?  Not the WWI version, but the one financially devastated this century.

 

Just go to this site or any population pyramid site and contrast US, Japan, and India.

 

https://www.populationpyramid.net/united-states-of-america/2020/

 

"the lost generation" is just another factor.  The age demographics are the issue on what percentage of the population can be productive in society.

 

So the biggest pig in the python since the baby boomers is now aged 20 to 34.  Why is that worrisome from a demand for loans standpoint?  Over the next decade, won't they be having kids and spending?  To anyone who hasn't had a child, spending is what occurs after you have one.

 

No the median age worker is significantly older and the peak spending is in early forties from memory.

 

Look at the median age of the population pyramid doesn’t make sense and then think of countries growing like India and shrinking like Japan and look at the US.

 

https://en.m.wikipedia.org/wiki/List_of_countries_by_median_age

[erdospi]

Changes in Monetary Policy and Banks' Net Interest Margins:

 

https://www.federalreserve.gov/econres/notes/feds-notes/changes-in-monetary-policy-and-banks-net-interest-margins-a-comparison-20190419.htm

 

Thanks I’ve read this prior, would encourage others too as well. Not going to debate the PhD’s that wrote it.

[sleepydragon]

A loan by Wells went bad.

Seems Wells Fargo is a “top lender”.

Hopefully not too many of these.

 

https://m.marketscreener.com/EXTRACTION-OIL-GAS-INC-31587299/news/Extraction-Oil-Gas-Files-for-Chapter-11-After-Executive-Payouts-30773521/

 

 

[erdospi]

A loan by Wells went bad.

Seems Wells Fargo is a “top lender”.

Hopefully not too many of these.

 

https://m.marketscreener.com/EXTRACTION-OIL-GAS-INC-31587299/news/Extraction-Oil-Gas-Files-for-Chapter-11-After-Executive-Payouts-30773521/

 

Reads like they are the DIP too... can’t tell need to see the filing

[ERICOPOLY]

No the median age worker is significantly older and the peak spending is in early forties from memory.

 

There are more people now in their 30s than in their 40s.  And there are more in their 20s than in their 30s.

 

I think your concern would get my attention if the population in their 40s were larger than the coming waves.

[erdospi]

No the median age worker is significantly older and the peak spending is in early forties from memory.

 

There are more people now in their 30s than in their 40s.  And there are more in their 20s than in their 30s.

 

I think your concern would get my attention if the population in their 40s were larger than the coming waves.

 

https://www.visualcapitalist.com/us-population-pyramid-1980-2050/

[DooDiligence]

A loan by Wells went bad.

Seems Wells Fargo is a “top lender”.

Hopefully not too many of these.

 

https://m.marketscreener.com/EXTRACTION-OIL-GAS-INC-31587299/news/Extraction-Oil-Gas-Files-for-Chapter-11-After-Executive-Payouts-30773521/

 

Reads like they are the DIP too... can’t tell need to see the filing

 

"The Company has obtained a committed $125 million debtor-in-possession financing facility (the “DIP Facility”), which contemplates $50 million in new money, up to $15 million of which will become immediately available upon Bankruptcy Court’s order, and a “roll up” of $75 million of revolving loans under the Company’s existing revolving credit agreement. The DIP Facility is underwritten by Wells Fargo Bank, National Association and the $50 million in new money is financed by certain lenders under the Company’s existing revolving credit agreement. Subject to Court approval, this DIP financing, combined with the Company’s cash from operations, is expected to provide sufficient liquidity during the chapter 11 cases to support its continuing business operations and minimize disruption."

 

"Further, to facilitate the Company’s swift exit from chapter 11, the Company announced it has entered into a restructuring support agreement (the “Agreement”) with certain of its unsecured noteholders. The Agreement outlines a restructuring plan that will effectuate a significant deleveraging of the Company’s balance sheet through a debt-for-equity swap, pursuant to either a standalone restructuring or a combination transaction, that will leave the Debtors’ unsecured noteholders with the majority of the Company’s equity while still providing a meaningful recovery to junior stakeholders. Though the Company was unable to obtain consensus across its entire prepetition capital structure prior to filing, the Company plans to use the chapter 11 process to build consensus for a comprehensive restructuring transaction that will allow the Company to emerge from chapter 11 with a right-sized, flexible balance sheet."

 

Link to filing:

 

https://ir.extractionog.com/static-files/7bf774e4-54ad-4811-bfc6-228505d7a8e3

 

---

 

What does it mean that Wells Fargo is resigning as trustee & Wilmington Savings Fund Society is the successor trustee?

 

---

 

FWIW, the word "compensation" is mentioned 343 times in the last proxy statement.

 

www.wsj.com/articles/extraction-oil-gas-files-for-chapter-11-after-executive-payouts-11592242621

[ERICOPOLY]

No the median age worker is significantly older and the peak spending is in early forties from memory.

 

There are more people now in their 30s than in their 40s.  And there are more in their 20s than in their 30s.

 

I think your concern would get my attention if the population in their 40s were larger than the coming waves.

 

https://www.visualcapitalist.com/us-population-pyramid-1980-2050/

 

And?  An army of people being highly paid to push wheelchairs around and operate dialysis machines?  Not only are the younger generations going to be working their full-time jobs, but they will have a second job at the senior center to look after the growing elderly population.  Will labor markets be good/bad for the younger generations who struggled over a great part of the past 15?

 

Where does the army of robots fit into the population pyramid and productivity?  That is mostly sarcasm, but intended to point out that it's tough to make long forecasts..

 

I think you are stressing one factor too much when it is multivariate. 

 

[ERICOPOLY]

Mr. Napier—who has spent two decades worrying about deflation and who wrote a book about major market slumps—now predicts inflation above 4% next year in developed markets due to government loan guarantees.

 

Governments, he thinks, have finally found a way to ensure that commercial banks lend: promise to cover bad debts. Heads, the banks collect the (slim) interest; tails, the government ends up with the losses. Of course banks will lend.

 

“It’s pure politicization of credit,” Mr. Napier said. “This is the magic money tree.”

https://www.wsj.com/articles/if-inflation-is-coming-the-market-isnt-ready-11592305397?mod=hp_lead_pos11

[A_Hamilton]

I can't simultaneously worry about their assets and capital taking a massive whack because of all the loan charges from the impending depression and also worry about their inability to ramp up lending for the last several years prior to said economic disaster or I will get a nosebleed.  Do you really want to book a bunch of "growth" for the years 2017 through 2020 if you think anything like what you are worried about is going to happen? 

 

They have a lot of expenses to trim even aside from the regulatory burdens.  This week Shrewsberry was already putting people on notice that cuts are coming.

 

You absolutely want growth right now. It is very unlikely that there will be net fixed capital formation on the bank end of this for a very long time. Thus, net loans across the system will very likely be muted to down over the next several years. You want to steal every relationship you possibly can in this environment and early before spreads begin to narrow dramatically for the shrinking pool of corporate borrowers. Too, on the bank end of this if loan demand starts to pick back up you want to be in pole position with CFO's/Treasurers of more companies. Wells is going to be forced to exit good relationships. It is hard to get back in once you volunteer out.

 

Too on the securities side a larger balance sheet is going to allow you to serve as the intermediary throughout markets. Listen to Daniel Pinto at JPM's most recent fireside chat. That scale you gain is invaluable and makes it very difficult to lose money in fixed income trading businesses.

 

We'll see how Wells does, but the asset cap in the current environment is similar to the death penalty for SMU (no, I'm not suggesting WFC will be a $0 or anything close to it)...you'll be able to field a team again, it is just going to be very badly hindered for a long long time.

 

Thanks for the interesting response.  I was thinking:  Ideally the asset cap will come off during the crisis (likely, as a regulatory reaction thereto) right when competitors are struggling with digesting all the loans they made during the last 3 - 5 years (e.g., citi ramping up unsecured consumer lending and becoming distressed again as they do every 5 years or so). 

 

Wells wasn't expanding to take on those beautiful golden west and countrywide customer relationships going into the last crisis either.  At least not until regulators went to them and begged them to steal Wachovia (but this time nothing as dramatic, just saying "cuffs are off boys, go lend!").

 

I personally don't want anything to do with trading businesses other than required to support the commercial banking operation.  Like Munger, I would only own WFC, BAC, or USB (maybe PNC) among the very large, network effect, money-supply banks and I kind of hate the former Merrill business, so that would be my last choice.

 

I understand not liking the markets businesses. It is always episodically problematic and you never now when your bank will be the star of the show (JPM london whale obviously the most recent example) or how deep the problem is (I'd argue London Whale at a $5 billion loss in total was a blip on the screen; the bigger loss was that JPM lost regulatory momentum to roll back some of the more capricious portions of Dodd Frank/ Gold Plating of US Capital Standards and then had to write Eric Holder and Obama a $20 billion check for no apparent reason other than, because).

 

A huge difficulty in owning only a retail/commercial bank at this point is that you are fighting the trends in capital markets towards more securitization versus balance sheet lending at the banks. Securitization can be a dirty word, but look at the players in the space today. It is not an unknowing insurance company buying a rating, it is Blackstone, Apollo, KKR. If you are going to own the equivalent of a money center bank (MTB big enough now, Truist, etc), I think you want to own ones that can (as responsibly as possible) capture that flow. Unfortunately there is no recording of it, but Jes Staley at Barclay's was speaking about this at Goldman's European Financial Services Conference last week. Seems like an immutable trend.

[sleepydragon]

Actually, I am not sure what going on with all these talks about NIM.

in 2016, I got my mortgage (30 year jump) from WFC at 3.25%. Today that rate is 3.5% at BAC and 3.25% at WFC.

(Unfortunately WFC doesn't even do jump refinancing now..)

 

My WFC representative says the reason is that there is a sell off of mortgage bonds - in other words none-bank lenders are not offering mortgage right now.

So, maybe that gives some perspective on the importance and competitiveness of big banks.

 

This is the email I got from WFC on March 23:

 

----

March 23, 2020

Why have mortgage rates increased?

The Federal Reserve has cut rates dramatically in March

But mortgage rates have increased. Why?

 

 

In response to the unprecedented challenge of COVID-19, the Federal Reserve has significantly loosened monetary policy this month, putting the lower bound of its target range at 0%. Meanwhile, yields on Treasury securities, while volatile, have fallen as well.

 

But these declines haven’t translated into a decrease in mortgage rates. In fact, mortgage rates have increased this past week and, generally, are higher now than they were at the end of February. Why?

 

The Fed works on the short-side of the market:

The Fed’s rate cuts act on the extremely short-end of the market – its target rate is for overnight loans that financial institutions make to each other. Mortgage loans, on the other hand, are priced on the basis of the longer-term side of the financial market.

 

Mortgage securities face pre-payment risks:

Generally speaking, mortgage lending is funded by selling mortgage-backed securities (MBS) on Wall Street. Borrowers, through the mortgage banking system, get the funds to purchase a home, and investors get an asset that generates a monthly cash flow as borrowers make their monthly principal and interest payments. But borrowers can also completely pay off their mortgage early, as they do when they sell a property or refinance their existing mortgage. The pre-payment risk inherent in MBS generates an uncertainty that’s not a factor with Treasury securities. During the recent market upheaval, investors are turning to Treasury securities, driving down yields on Treasury securities. Because of the pre-payment risk and the anxiety about the economic outlook, rates on MBS need to be even higher than usual over Treasurys to continue to attract investors.

 

Mortgage industry capacity squeezed:

The mortgage industry simply doesn’t have the capacity to handle the influx of applications coming in due to the low mortgage rates. The industry as a whole was already under stress with the low mortgage rates in January and February. Appraisers, underwriters, originators, title attorneys, processors, and others were stretched to take care of the customers in the pipeline before the end of February. An even lower mortgage rate across the industry would add fuel to the fire, negatively impacting customer service and leading to a rise in missed closing dates.

 

But even with all that, industry mortgage rates remain historically low.

 

Through all of this market churning, Wells Fargo is committed to helping our customers. We’re here for the long term, and we’ll be here when we emerge from the market disruption caused by the coronavirus. However I can serve you, I’m here to help!

 

--------

[erdospi]

No the median age worker is significantly older and the peak spending is in early forties from memory.

 

There are more people now in their 30s than in their 40s.  And there are more in their 20s than in their 30s.

 

I think your concern would get my attention if the population in their 40s were larger than the coming waves.

 

https://www.visualcapitalist.com/us-population-pyramid-1980-2050/

 

And?  An army of people being highly paid to push wheelchairs around and operate dialysis machines?  Not only are the younger generations going to be working their full-time jobs, but they will have a second job at the senior center to look after the growing elderly population.  Will labor markets be good/bad for the younger generations who struggled over a great part of the past 15?

 

Where does the army of robots fit into the population pyramid and productivity?  That is mostly sarcasm, but intended to point out that it's tough to make long forecasts..

 

I think you are stressing one factor too much when it is multivariate.

 

Enjoy the sarcasm but I don’t think you are seeing the counter argument. I don’t think I’m stressing one factor too much. Where does economic growth come from? If the percentage of population that is spending is shrinking in the US and we aren’t replacing our population and leverage has a significantly lower impact or even 0 impact, where does growth come from?  Wage increases, maybe a redistribution of wealth will drive increase spending but if you run a business and you know you have less customers and they are already maxed out on leverage where does marginal spending come from? 

[erdospi]

Mr. Napier—who has spent two decades worrying about deflation and who wrote a book about major market slumps—now predicts inflation above 4% next year in developed markets due to government loan guarantees.

 

Governments, he thinks, have finally found a way to ensure that commercial banks lend: promise to cover bad debts. Heads, the banks collect the (slim) interest; tails, the government ends up with the losses. Of course banks will lend.

 

“It’s pure politicization of credit,” Mr. Napier said. “This is the magic money tree.”

https://www.wsj.com/articles/if-inflation-is-coming-the-market-isnt-ready-11592305397?mod=hp_lead_pos11

 

At least I’ve been consistently wrong! These guys like Roubini that just show up for a consulting protest.

[ERICOPOLY]

If the percentage of population that is spending is shrinking in the US and we aren’t replacing our population

 

The operative word here is 'percentage'.  The US population is growing.

 

If you take a simple example of 5 people in their 40s, and then add one more person aged 80, you now have 6 people and the percentage of the population that is spending is shrinking.  So what?  It takes more spending to support 6 people as compared to 5.

 

[erdospi]

If the percentage of population that is spending is shrinking in the US and we aren’t replacing our population

 

The operative word here is 'percentage'.  The US population is growing.

 

If you take a simple example of 5 people in their 40s, and then add one more person aged 80, you now have 6 people and the percentage of the population that is spending is shrinking.  So what?  It takes more spending to support 6 people as compared to 5.

 

Right, but now you are assuming a lot and that goes back to the population pyramid which basically negates that simple example.

 

https://www.census.gov/library/stories/2019/12/new-estimates-show-us-population-growth-continues-to-slow.html

 

https://www.npr.org/2019/12/31/792737851/u-s-population-growth-in-2019-is-slowest-in-a-century

[ERICOPOLY]

If the percentage of population that is spending is shrinking in the US and we aren’t replacing our population

 

The operative word here is 'percentage'.  The US population is growing.

 

If you take a simple example of 5 people in their 40s, and then add one more person aged 80, you now have 6 people and the percentage of the population that is spending is shrinking.  So what?  It takes more spending to support 6 people as compared to 5.

 

Right, but now you are assuming a lot and that goes back to the population pyramid which basically negates that simple example.

 

https://www.census.gov/library/stories/2019/12/new-estimates-show-us-population-growth-continues-to-slow.html

 

https://www.npr.org/2019/12/31/792737851/u-s-population-growth-in-2019-is-slowest-in-a-century

 

I haven’t assumed anything, I believe that you have misunderstood me.  I have previously stated that the age 25-40 demographic is larger than the age 40-55.  There will be more peak spenders, not less, and we will have an increase in the number of elderly who spend, albeit at lower levels.

[erdospi]

If the percentage of population that is spending is shrinking in the US and we aren’t replacing our population

 

The operative word here is 'percentage'.  The US population is growing.

 

If you take a simple example of 5 people in their 40s, and then add one more person aged 80, you now have 6 people and the percentage of the population that is spending is shrinking.  So what?  It takes more spending to support 6 people as compared to 5.

 

Right, but now you are assuming a lot and that goes back to the population pyramid which basically negates that simple example.

 

https://www.census.gov/library/stories/2019/12/new-estimates-show-us-population-growth-continues-to-slow.html

 

https://www.npr.org/2019/12/31/792737851/u-s-population-growth-in-2019-is-slowest-in-a-century

 

I haven’t assumed anything, I believe that you have misunderstood me.  I have previously stated that the age 25-40 demographic is larger than the age 40-55.  There will be more peak spenders, not less, and we will have an increase in the number of elderly who spend, albeit at lower levels.

 

https://www.federalreserve.gov/econresdata/notes/ifdp-notes/2016/effects-of-demographic-change-on-gdp-growth-in-oecd-economies-20160928.html

 

[Cigarbutt]

Wells Fargo has considered the demographic dilemma.

https://fa.wellsfargoadvisors.com/karnes-group/Demographic-Dilemma.c8153.htm?_Demographic-Dilemma_id=2865021

https://www08.wellsfargomedia.com/assets/pdf/commercial/insights/economics/special-reports/ces-20190515.pdf

 

Interestingly, the US reported its lowest population growth in 2019 (about 0.5%) which is a low point last seen in 1918 (WWII, Spanish flu epidemic). The growth rate is still higher than Europe and Japan is going negative. A counterpoint may include a new normal with older people staying employed longer, having a higher net worth going into retirement and spending more or even big bank oligopolistic consolidation. An aging population may be a separate independent factor behind progressively lower net interest margins.

 

If Japan is leading the way, the growth in loans remained anemic and digesting NPLs took a long time. Japanese banks kept receiving excess deposits (vs loan demand) and switched their model to direct assets to a growing share of JGBs and, eventually, have been moving up the risk ladder (domestically and internationally). Japanese banks' NIMs have also followed a negative trend line but somehow, not unlike European counterparts, started from lower levels.

 

Banks need higher interest rates and a positively sloped yield curve. i don't think a baby boom is on the way.

 

[meiroy]

https://www.calculatedriskblog.com/2020/06/mba-mortgage-applications-increase-in_17.html

"Mortgage applications increased 8.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 12, 2020.

 

... The Refinance Index increased 10 percent from the previous week and was 106 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 4 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 21 percent higher than the same week one year ago.

...

“Purchase applications increased to the highest level in over 11 years and for the ninth consecutive week."

 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.30 percent from 3.38 percent, the lowest level in survey history, with points decreasing to 0.29 from 0.30 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans."

 

 

But then there's CRE...

 

 

 

[meiroy]

 

Wholesale used vehicle prices (mix, mileage & seasonally adjusted) based on

@Manheim_US

Index increased 6.6% in first 15 days of June relative to the full month of May https://publish.manheim.com/en/services/consulting/used-vehicle-value-index.html If price level holds for full month, values will be fully recovered and set new record