Magazine : Archives : 3rd Quarter 2019

Market Intelligence

As a general rule, even a moderately profitable bank will struggle to responsibly invest all its earnings into organic growth. There are only so many good loans to make in any market. Loading up on securities will impair a bank’s net interest margin. And mergers and acquisitions should be driven by the quality of available acquisition targets, not the amount of capital held by an acquirer. To earn a satisfactory return on equity, then, a bank must find other ways to deploy excess capital. This is why banks are buying back so much stock right now. In 2018, the two...