Greedy Banks Stung
By Credit Crunch, Now Slow To Lend
With banks seemingly at the
forefront of the credit crunch, they are beginning to rally back with a vengeance.
Some banks emerged with excess capital and more loans. Others are investing in
technology and commercial lending. And others, to stave off uncertainty, are suspending
stock buybacks and putting a halt to raising dividends. Some
say money is the root of all evil, yet without this root, survival is hindered
in the most basic sense. Major banks have noted more than $250 million dollars
in write-downs in asset values, liquidity problems, signs of a recession and plunging
home values. All this appears to signify the loss of the banking industries strength.
Yet banks are beginning to rally back and escape the credit crunch. To
rally against the credit crunch some banks declined to raise dividends this year
but to keep them at their current level. While other banks have suspended stock
buybacks to preserve capital as a cautionary measure. Moving forward when the
confidence and trust in the financial sector is precarious at best, banks are
beginning to see the light at the end of the tunnel. Though challenges lie ahead
growth is imminent. Credit
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Smaller
banks investments in technology and commercial lending gives them the flexibility
to compete with larger institutions. And some financial offices may deem it a
plus to operate in slow-growth markets where business leaders are cautious yet
optimistic. Also within these markets home values seem to be rising rather than
falling as they are in the larger markets. Financial institutions
are easing their way out of the banking credit crunch by boasting of loans for
business’s had a growth of about 25 percent last year. While business checking
accounts grew by almost 8 percent and municipal deposits by almost 35 percent
in some areas. Adding new customers and keeping a whopping 90 percent of its “loyalty”
customer base has allowed banks to rally back. The ability
for bank survival also depends on acquisitions. To fill in the gaps of the market,
smaller banks are keeping a watchful eye on acquiring bank in areas where their
financial presence is not common. Expanding customer base and building on what
already exists includes leveraging technology to serve customers as well as selling
or closing other branches. Having an excess capital cushion
is also a reassuring commodity for financial institutions. Some boast a percentage
of 7.5 of assets. Protecting that asset right now seems prudent in such tumult
times, however the deployment of said capital will ensure success in the future.
Strengthening the banking organization as it sits currently
is its primary focus. Deepening its dependability and services to its customers
are also paramount. And in keeping with that dependability, holding onto a percentage
of assets allows banks to move slowly and protect their clients. Banks
are easing their way out of the credit crunch by focusing on growth, continuing
to make what they have now more profitable. Concurrently, looking at opportunities
to branch out and expand is also on the agenda for most banks. With comprehensive
strategy, focus and discipline, banks will continue to offer services to continue
the growth of the economy.
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