What Changed? | The banking industry's headline results still look fine—profits are steady, margins haven't collapsed, and deposits are no longer shrinking. But the center of gravity has shifted from credit risk to funding risk. | In the FDIC's third-quarter 2025 profile, net interest margin improves modestly. That's the good news. The more important detail is how it improves: earning-asset yields rise faster than funding costs in the quarter, even as deposit mix continues moving toward interest-bearing balances. | The question for a "higher for longer" regime is less about whether banks can handle high rates in theory—and more about whether they can handle deposit competition in practice, while loan demand remains uneven. | | Below is an important message from one of our highly valued sponsors. Please read it carefully as they have some special information to share with you. | | Early investors who bought shares during Amazon's 1997 IPO have had the chance to make a fortune. | In fact, Amazon has climbed more than 255,000% in the time since – enough to turn a $100 bill into more than $250,000! | But if you missed out, don't kick yourself… | According to a report from Capital.com, Elon Musk could be gearing up to take his internet satellite giant, called Starlink, public… in what Fortune magazine says will be the biggest IPO in history! | And here's the kicker… | With an estimated value of more than $100 billion, that means Starlink's potential IPO could be a staggering 287 times bigger than Amazon's 1997 IPO. | It'll also be 55 times bigger than Apple's IPO, 128 times bigger than Microsoft's IPO, and 177 times bigger than Nvidia's IPO, to name just a few. | In other words, the amount of wealth that could be up for grabs during Starlink's IPO will be nothing short of mind-boggling. | But that's not all… | For the first time ever, James Altucher – one of the world's top venture capitalists – is sharing how ANYONE can get a pre-IPO stake in Starlink… with as little as $100! | That means you have the first-ever chance to skip the line, and position yourself BEFORE the IPO takes place. | Click here now to see how to take action. | | The Numbers | Industry net interest margin (NIM): 3.34% in Q3 2025, up 9 basis points from Q2. Q3 rate math: yield on earning assets +11 bps versus cost of funds +2 bps. Domestic deposits: +$92.2B (+0.5%) in Q3; interest-bearing deposits rise while noninterest-bearing is roughly unchanged. Loan growth: total loans and leases +$159.0B (+1.2%) in Q3; 12-month growth rate 4.7%. Deposit competition benchmark (as of Dec. 15, 2025): national rates include 0.58% on money market and 1.63% on 12-month CDs, with national rate caps above 5% for several tenors.
| | Why It Matters | "Higher for longer" is often framed as an asset-side story—loans reprice, securities roll down, and margins eventually normalize. In 2025, the more decisive story is on the liability side. Even with Q3's NIM improvement, the deposit base keeps migrating toward interest-bearing balances, which raises the odds that funding costs keep grinding higher even if asset yields stop rising at the same pace. | On the demand side, banks don't have a clean, broad-based loan acceleration to offset that pressure. The Fed's October 2025 SLOOS shows banks tightening C&I standards across firm sizes, while reporting stronger C&I demand mainly from large and middle-market borrowers and essentially unchanged demand from small firms. That mix is consistent with a world where balance-sheet growth exists, but pricing power is harder to sustain. | Weekly Fed H.8 data reinforces the "steady, not booming" picture—loans and leases in bank credit show mid-single-digit annualized growth rates into late 2025, not the kind of surge that naturally outruns funding repricing. | Preparedness, then, looks practical: | A deposit franchise that stays "transactional" rather than rate-chased Asset-liability discipline that assumes margins can compress again Underwriting that preserves spread without relying on volume
| | Takeaway | Banks don't need a crisis to face a harder year. In a higher-for-longer regime, the quiet risk is that deposit competition keeps getting sharper while loan demand stays selective—turning NIM from a tailwind into a slow headwind. | — Lauren Brown
Editor, American Ledger | Sources | Federal Deposit Insurance Corporation, November 2025 https://www.fdic.gov/quarterly-banking-profile/quarterly-banking-profile-third-quarter-2025-pdf.pdf
Federal Deposit Insurance Corporation, November 2025 https://www.fdic.gov/quarterly-banking-profile/quarterly-banking-profile-q3-2025 | Federal Deposit Insurance Corporation, December 2025 https://www.fdic.gov/national-rates-and-rate-caps | Federal Reserve Board, November 2025 https://www.federalreserve.gov/data/documents/sloos-202510.pdf | Federal Reserve Board, December 2025 https://www.federalreserve.gov/releases/h8/current/h8.pdf |
|
No comments:
Post a Comment
Keep a civil tongue.