US Banks Exposure to PIGS

‘Doomsday’ is a term used with alarming frequency in recent articles.  The reasons are many, but I only just learned that the global economy is under threat in yet another way:  big U.S. banks have something like 15% of their total commercial banking assets at risk in Europe.  I don’t see how another financial crisis can be avoided, and my worst fear is that it will be a lot worse than the last one.  I hope I’m wrong, but it seems prudent to get out of any connections with the following banks and their exposure to PIGS.

Bank of America – $14.6 billion, Citibank – $20.6 billion, and JP Morgan Chase – $15 billion.


Margins Getting Tighter

When one lender is offering 3-year fixed home loans for under 6%, and another is offering 3-year term deposits for over 6%, you can have confidence that their margins are historically tight, and that genuine competition is back.  That’s good news for consumers, but not necessarily for businesses.

Interest rates for asset finance and business loans have been in a slow downtrend in line with bank bills, which dropped this week by 20 points in response to the RBA’s cut of 25.  Margins, however, remain at about 3%.