Anyone hoping for a big drop in commercial lending rates this year should find Nika Cataldo’s story in this week’s issue sobering. There’s only so far any one bank can lower its loan interest rates before eating too far into its already-shrinking profit margin.
Despite signals that the Federal Reserve will likely cut interest rates this year, banks will still find it tough to keep high deposit rates from eating into their profit margins, observers say.
Even if the Federal Reserve cuts its benchmark interest rate next year as predicted, banks may not in fact be able to realize lower deposit costs thanks to customer demand for high-yield products.
Worcester County’s Cornerstone Bank is facing off in a fight for deposits against some of the same giant banks where its head of retail banking, Altaf Ahmed, worked for 20 years.
High interest rates on deposit products helped several smaller local banks come away from the spring banking turmoil with big hauls. But can they keep those new customers now that the crisis has passed?
An S&P survey says bank executives are getting less optimistic as they expect to pay more to continue keeping deposits and to rely more on deposit rate specials.
