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Bank Collapse 2.0
Turbulent Lending Conditions Are Shaking Up the Banking Sector Yet Again
Michael Campbell
05 Nov
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Turbulent Lending Conditions Are Shaking Up the Banking Sector Yet Again
In October, the average interest rate for a 30-Year Fixed Mortgage hit 7.69%; the highest it’s been in over two decades. At the same time, distressed commercial loans have flipped investor balance sheets upside down.
The combination of staggeringly high debt costs, a lack of office demand, and home prices that won’t budge, has kept homebuyers and borrowers far away from the market. Many have placed their house-hunts and acquisition pursuits on pause, as they patiently await a bit of reprieve from nearly 8 consecutive quarters of rate hikes.
With transaction volume sinking lower and loan rates rising, banks have found themselves with little to offer. This has left even the largest institutions with no other option but to downsize in an effort to cut costs and mitigate risk as financial pressure mounts towards the close of the year.
Bank of America, Wells Fargo, JPMorgan Chase and U.S. Bancorp have all announced that they will be closing multiple branches throughout Atlanta, Dallas, Los Angeles, Phoenix, and San Francisco.
JP Morgan Chase has shed the most dead weight thus far. Last month they closed 21 former First Republic Bank locations throughout California. Bank of America trails just behind Chase. They recently requested to close 20 branches. U.S. Bancorp has claimed the least amount losses; closing four branches throughout the Midwest this month.
Not just Q4, but 2023 as a whole has been a tough stretch for banks. In March there was the Silicon Valley Bank Collapse, which cascaded into an industry-wide fiasco resulting in the closure of countless regional banks. Now, financial institutions - big and small - are being met with more turbulence as they attempt to weather the storm that’s been brought on by the rapid rise in interest rates and looming uncertainty from the Fed. With a fresh new fiscal year approaching, both consumers and banks are hoping that clear skies lie ahead.
Quick Takeaways
The Nation’s Largest Banks Have Announced Closures Across Various Major Metros
Bank of America, JP Morgan Chase, Wells Fargo and U.S. Bancorp Will Be Shutting Down At Least 45 Locations
On Another Note
✺ CoStar Continues to Close In On Zillow As the #1 Housing Platform: As they celebrate their 50th straight quarter of double-digit revenue growth, and announce their offer to acquire OnTheMarket - one of the top three residential property portals in the UK - CoStar is in hot pursuit of Zillow as the global go-to housing marketplace. — Business Wire
✺ Toronto Aims To Tackle 65,000 New Homes: The only issue is that they’ve only secured funding for 4,455. This leaves Canada’s largest city $30B short of the capital that they need to meet their housing goal. — CBC
✺ Borrowers Seek Relief With Adjustable Rate Mortgages: The ARM (Adjustable Rate Mortgage) earned a bad wrap following the ‘08 Financial Crisis, but with the average interest rate for a 30-Year Fixed Mortgage approaching 8%, ARMS are reemerging as a rational option for hopeful homeowners. — CNBC
✺ The White House Stokes the Flames to the Red Hot Office-to-Residential Conversion Market: The Biden Administration will be publishing an office-to-residential conversion guidebook which will include everything from available properties to funding opportunities. — Bisnow
✺ Charles Schwab Plans to Chop Jobs and Office Square Footage in Their Real Estate Department: In wake of a $500M YOY (Year Over Year) decline in net profits, the behemoth investment banking and financial services company has announced upcoming plans to reduce staffing and office space within their real estate sector. — Inman
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