RankingBanking Web Pageturn - Flipbook - Page 4
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The Best Banks
Played Defense
By Emily McCormick
B
anks, along with the U.S. econ-
ing such high deposit volumes; hedging could
omy, came down off a sugar high
have also helped them manage duration risk. If
in 2022. This wasn’t just the
banks tell him they got hung to dry in the secu-
result of pandemic-era stimu-
rities portfolio but they have plenty of capital,
lus leading to record growth in
“that’s a red flag to me, because asset/liability
deposits, though that certainly
management’s not a new thing,” he says.
played a role. It was also caused
Each year, Bank Director’s RankingBanking
by years of zero-to-low interest
study examines the performance of the 300
rates, lulling consumers into ac-
largest publicly traded banks. Over time, it has
cepting little in return for those
recognized numerous banks that consistently
funds — and leading some bank
perform well — companies that you’ll find fea-
leaders to make incorrect assumptions about
tured within the 2023 RankingBanking report,
interest rate risk.
sponsored by Crowe LLP.
That began to change in late 2022. The Fed-
But some that performed well in past itera-
eral Reserve, in its fight against inflation, ush-
tions of the annual scorecard didn’t survive far
ered in a steep increase in interest rates. De-
into 2023; others are struggling. Those banks
posits started to slowly move out of banks. But
“have forgotten some of the basics, blocking
worse, bank assets, including bonds and loans,
and tackling,” says Crowe Partner Rick Childs.
went underwater as rates rose.
“That is not to block yourself into incredibly
We’ve seen a similar story before, following
long durations on your portfolios.”
Fed Chair Paul Volcker’s rate hikes back in the
Bank Director leveraged a consistent set of
1970s and 80s. Unfortunately, some banks for-
metrics to determine the best banks, based on
got the basics of asset/liability management.
calendar year 2022 results: return on average
“It’s easy to manage interest rate risk,” says
equity and return on average assets, the tangi-
Dory Wiley, CEO of Commerce Street Holdings,
ble common equity ratio, nonperforming assets
which offers investment banking services; Wiley
and total shareholder return. Those metrics
also invests in bank stocks. He believes banks
measure profitability, capital adequacy, asset
should have been more selective about accept-
quality and investor returns. S&P Global Mar-