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PCBB Banc Investment Daily December 24, 2014
Banc Investment Daily
December 24, 2014

Patience And 12 Days

Last week, following the final meeting of the FOMC for 2014, the word "patient" was added to the Fed's policy statement. "Patient" was not a substitution for "a considerable time" but rather an addition to the previous language. The explanation by Fed Chair Yellen was that "considerable time" referred to an event now in the past (the Fed's asset purchases) and therefore the reference is no longer a relevant measure (yet the language remains at least until next time).
What the markets heard was that short term interest rates will not rise in the next few months and there was much rejoicing (it is the holiday season after all). All this rejoicing led to a gain of 700+ points on the DJIA in two days and on to top 18,000 yesterday. This is pretty exuberant given the drop in oil prices, a slowing global economy and the cratering Russian Ruble.
We won't dampen the party, but in the end the Fed basically reiterated its concerns over employment (still slack but improving) and inflation (lower than they would like), but acknowledged progress in the economy (strong GDP and a lower unemployment rate) and set the stage for an increase in short term rates sometime in mid-2015.
The Fed also cautioned investors that its decision will be data dependent, and left the door open for pretty much anything. After much breathless speculation by the financial press, expectations for Fed policy action are pretty much the same as they have been for months. Bankers will need to remain patient as well, looking for opportunity as the economy improves and controlling deposit costs as short term rates rise.
We finish today's issue with the Banker's Twelve Days of Christmas, outlining all the gifts bankers can expect in 2015:
On the first day of Christmas, my true love gave to me:
Our Best CAMELS Rating In Years
On the second day of Christmas, Chair Yellen gave to me:
Two Fed Tightenings
On the third day of Christmas, new rules to implement:
Basel III Regs
On the fourth day of Christmas, my CFO did file:
Four Call Reports
On the fifth day of Christmas, my lenders found for me:
Five Big Hedged Loans
On the sixth day of Christmas, to manage CRE:
Six Loan Stress Tests
On the seventh day of Christmas, good management produced:
Seven Cost Reductions
On the eighth day of Christmas, the tellers are all stars:
Eight Happy Clients
On the ninth day of Christmas, the techies undertook:
Nine IT Upgrades
On the tenth day of Christmas, our loan group approved:
Ten C&I Loans
On the eleventh day of Christmas, consumer lenders sold:
Eleven Funded HELOCS
On the twelfth day of Christmas, our bank reports to all:
Twelve Months of Profits
Happy holidays to everyone in your bank!