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I think they are moving into this result because they are, more realistically than most others, positioning themselves for "lower for longer" rates.
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How? From what you infer this? I am curious to understand this. Possibly "lower for longer" may be with us longer :)


It's in two parts.
The first is their expectation, and the second is what they're doing to act on it.
I know it's their expectation, as they say so, e.g. what their treasurer said in the recent quarterly conference call.
They expect rates to be a lot lower than a lot longer than most other banks who are
getting ready to start making money again when rates rise soon...or so they believe.

The second is what they're doing about it, how they are positioning for that expectation.
I'm not too clear on the details, but there are many things at the margin a bank can do.
As I understand it, the biggest thing is sticking to holding more loans and with longer terms.
If they went more with short duration and offloading more loans (more as
others are doing), they could better roll into newer higher-rate loans when the rates rise.
By having longer terms they make more while rates are low, but give up
some of that opportunity to bump up quickly when rates rise. IF rates rise.

As a specific example, Bank of America is towards the other end of the spectrum.
Based on rate sensitivity disclosures, BofA says a 1% rise in the whole rate curve
would bump their net interest income 15% ($6bn), Wells Fargo estimates only 2-5%.

Jim
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