|
Ten Largest Thrift Companies:
|
|
Interest-Rate Environment Supports Strong Earnings
|
| August 15, 2002
|
 |
| Since the onset of recession in
early 2001, economic conditions have been less than ideal for
many households, businesses, and commercial lenders. However,
the interest-rate environment accompanying the recession has
been generally supportive of high earnings for the nation's
10 largest thrift institutions (hereafter, the "10
Largest"), which specialize in mortgage lending. Earnings
for the 10 Largest rose in the second quarter to $1.7 billion,
a $24 million increase from first-quarter results. The
weighted average return on assets (ROA) was 1.34 percent, up
from 1.27 percent in the first quarter (Chart 1). A detailed
discussion of overall results and information on individual
companies are available in the FDIC's report, Ten Largest
Thrift Companies.
| |
 D
The yield curve remained relatively steep in the second quarter,
limiting declines in net interest margins, while falling long-term
interest rates helped produce large gains on sales of securities for the
10 Largest. The fact that long-term, fixed mortgage rates again approached
30-year lows during the quarter helped to support high volumes of home
sales and mortgage refinancing. The result has been continued strong
originations of mortgage loans accompanied by a reduction in the value of
mortgage servicing rights. However, today's report shows that the 10
Largest were somewhat successful in buffering themselves from the adverse
effects of mortgage prepayments through the use of hedging strategies.
Current economic trends appear to point to continued high volumes of
mortgage origination for the 10 Largest in the third quarter. With 30-year
Treasury yields falling below 5.0 percent this week, long-term mortgage
rates could at least briefly dip to their lowest levels in a generation.
Meanwhile, mixed signals about the pace of the apparent economic recovery
give no sign that short-term interest rates will rise dramatically in the
near-term, which implies that net interest margins should also remain relatively
strong during the third quarter. |
Send comments on this FYI to: Tim Critchfield tcritchfield@fdic.gov
Send feedback and technical questions about the FYI series to:
fyi@fdic.gov
|
