ABA Banking Journal - November 2007 - (Page 12)

briefing N.Y. hiring bonanza may be a bane T he very forces that make it a good time to be a bank customer in Manhattan right now may be making it a bad time to be a banker. The unstoppable roll of new branch openings in New York County—more than half of them in Manhattan— necessitates bankers to staff those banks. But the boon of a hiring boom, on closer analysis, may represent the degradation of the profession. “There are more jobs, but they’re lower paid,” said one manager. “With so many branches, to be a banker is becoming more like a retail store job, whereas before, it implied expertise and pay to match,” said one career banker, who preferred not to be named. Another, at JPMorgan Chase, which has rolled out many new branches in response to newcomers flooding Manhattan, said a lot of those banks do not pay to educate their staff, as was traditional before. NYC may be experiencing something unique, said ABA spokesman John Hall, but, he added, “front-line employees are always hard to find and have so much to know with so much compliance now required.” The latest FDIC statistics show a 35% increase in NYC bank branches between mid-2002 and mid-2006, which does not appear to be abating. Most of the 631 branches are in Manhattan, an island that’s not even a two-mile by 13-mile stretch. ABABJ recently encountered not one but two bankers who commute weekly from Canada to Manhattan to work for different banks. Both felt their situations were a bit unusual in that they are technology specialists, not branch staff. Indeed, branch employees said they would not earn enough to justify such a commute. —Orla O’Sullivan, a freelance writer based in New York City Snapshot A look at held-for-investment loan growth T he turmoil in the mortgage markets and how it relates to banks, has been addressed from many different angles including originations, asset quality, and earnings. Less reported but as interesting are the trends in what banks are holding for investment versus as for sale. In a environment like today’s, with credit pinched, a tepid secondary loan market, deposit costs going up, and an unfriendly yield curve, decisions about what to originate and, in turn, what to hold or sell take on added importance. Naively, one would expect that the average bank would see an up-tick in the loans held for investment, but a decelerating growth rate. The bank is focused on originating quality loans to hold instead of originating and selling. Similarly, one would expect an up-tick in the loans held for sale, in large part because of a decline in the capacity of buyers in the secondary market. A look at the trends for a subset of loan types for major exchange traded banks and thrifts bear this out (see chart). The trend in 1-4 family loans shows the one segment that has been the most heavily impacted by the mortgage market shakeup. It follows this line of thought, with the growth in loans held for investment up as compared to the prior period, but down as compared to the prior year. Home equity and other consumer loans (we are using a GAAP based loan definition, so this classification will differ from FDIC reporting in where it falls) saw a similar trend as with the 1-4 family loans. The commercial real estate segment was strong, contrasting other categories. This suggests that the banks are seeing value in these loans and are holding onto more. Overall growth in loans held for investment has been relatively robust, indicating that while some segments have been pulling back, others have been able to fill the gaps. Loans held for sale growth has always been volatile given the nature of how it is used to manage balance sheets and the relatively small size of these portfolios. The most notable item in the trend is that growth has steadily been moving upward over the last few quarters. The stats are interesting on the macro level. However, they beg the question, what sort of bank will perform well in this market? The answer: banks that are originating quality low-risk prime loans. With risk comes returns and in this market too much risk in the wrong place reminds us that not all returns are positive. —John McCune, SNL Financial jmccune@snl.com Median held-for-investment loan growth Major-exchange-traded banks and thrifts 2007 Q2 2007 Q1 2006 Q4 2006 Q3 2006 Q2 1-4 Family Loans (%) Commercial Real Estate Loans (%) Home Equity Loans (%) Total Consumer Loans (%) * Loans Held for Investment (%) Loans Held for Sale (%) 4.08 9.38 6.11 6.00 8.03 17.95 -0.31 6.58 -3.23 -4.25 4.95 16.51 1.59 8.78 -0.43 0.80 7.10 8.97 5.49 9.11 4.37 4.74 8.90 -29.08 5.19 10.63 8.35 8.49 12.99 57.08 Source: SNL Financial and SEC Filings * includes home equity loans. The percentages in this table, the growth rates, are calculated on a linked-quarter basis and are annualized by multiplying by 4. 12 NOVEMBER 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.snl.com http://www.snl.com http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal - November 2007

ABA Banking Journal - November 2007 Contents Editor’s Column Briefing: Good News for Mortgages Sleight of Mind N.Y. Hiring Bonanza May Be Bane Snapshot: A Look at Held-For-Investment Loan Growth ABA Resources ABA Chairman’s Position “The Moose Bank” Thrives on Manufactured Housing Loans Finding the Middle Way for Your Bank’s Retirement Program Pass the Aspirin Cover Story: Self-Service Steps Up DIY U.K. Style Marketing to Millennials Getting Real With “Gen Wired” Ethnic Marketing: Disinterested Banking Getting Good at Global Sourcing Case in Point Turn Compliance on It's Head Banker’s Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - November 2007

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