Harry Terris

Monthly reports show that improvements in credit card performance are leveling off, presaging an end to reserve releases that have propped up bank earnings. The graphics here show delinquencies and chargeoffs for the Big Six.

Leveraged loan issuance slumped in the third quarter, but the amount funded by deposit-rich banks held up and investment grade volume was healthy. Now, dollar shortages at European banks are adding a new dimension to the turmoil.

Net interest margins came under severe pressure in the third quarter as the yield curve flattened and banks absorbed a surge of deposits. This interactive graphic displays key metrics for large bank holding companies that offer insight on which ones fared better than others.

A 15% annual rate of growth in commercial lending at big banks helped absorb surging deposits, according to preliminary data. But loan growth was weak at small banks, leaving bulges in holdings of cash and securities alone.

Receiving Wide Coverage ...Eurozone Crisis, Chapter 42: German Chancellor Angela Merkel mustered a political victory by winning approval of the expansion of the European bailout mechanism in a parliamentary vote that would have passed on the stregth of her coalition's support alone. The Times said Slovakia "is the only remaining wild card" in a process that requires the assent of all 17 European Union countries. But even though the paper predicted that opponents in Slovakia would cave under pressure from the rest of the bloc, a fraught road lies ahead to secure the further amplification of the European Financial Stablitity Facility that many analysts believe is necessary to resolve the crisis. The Journal said, "As deputies emerged from the assembly in the Reichstag in central Berlin, a number of lawmakers predicted Ms. Merkel would have to ask parliament for more money soon." Wall Street Journal, New York Times, Washington Post

Among regional banks, funding costs at time deposit-dependent institutions have improved but still substantially exceed rates paid by competitors, and some could be set for expanding net interest margins as CDs gravitate toward market yields.

Funding costs at large institutions with big proportions of time deposits have been closing in on funding costs at peers, and maturing certificates of deposit are set to continue to buffer net interest margins.

Reports filed by major issuers in mid-September - the first round of data since the debt ceiling standoff and since the Eurozone crisis boiled anew - were mixed, but showed no major fault lines.

Employment in the mortgage industry continued to grind down in recent months, and the current revival in loan volume appears likely to produce a modest reversal in the trend at most.

Recession-era cuts merely kept ratios of assets to employees stable as balance sheets shrank, and current ratios of compensation to earnings are well above levels that prevailed before the downturn.

Sudden pessimism over the economy has flattened interest rates, and revived refinancing volume and mortgage production margins.

A ranking of midsize banking companies by funding rates in which SVB Financial places first and First BanCorp places last puts different business models, and local economic conditions, in full view.

Large securities portfolios have helped generate relatively weak net interest margins as rates have become anchored at historically low levels.

Big bank margins have contracted for five consecutive quarters, and are poised to shrink again during the current period amid a continuing buildup of deposits and a flatter yield curve.

Record-low delinquencies are pointing toward further declines in writeoff rates, though the industry appears to be approaching the point where loan performance can improve no further.

The decline in consumer credit has contributed to a decline in bankruptcy filings and the amount of debt discharged through them, helping to reduce chargeoff rates.

Issuers of retail credit cards sought to exit the business en masse during the downturn. Now the industry's appeal is on the rise, along with a dramatic improvement in its performance.

Banking companies that received rescue capital from the government and fall behind on payments have trouble getting out of the hole.

Comerica had the lowest cost of deposits in the first quarter among a group of large bank holding companies, and Discover ranked last. Still, cheap funding is not a sufficient condition for profitability.

Bank stocks outpaced losses in the broader market Monday, following a familiar pattern. The volatility is likely to continue as the industry tries to earn its way past doubts about capital strength.