Fallout from the subprime loan crisis will continue to plague the industry
New York, NY (PRWEB) October 26, 2014
A decline in deposit volumes and exposure to subprime mortgages continued to damage the Savings Banks and Thrifts industry over the five years to 2014. Industry participants, including savings and loan associations, savings institutions and thrifts, witnessed deposit levels decline over the five-year period; the majority of these funds were relocated to commercial banks that fall outside the scope of the industry. As industry operators largely generate revenue from lending out deposits to consumers and businesses at higher interest rates, this exodus of deposits from savings institutions has impaired the industry's performance.
In addition, a weakened appetite for credit from consumers and businesses during the five-year period is also to blame for the Savings Banks and Thrifts industry's relatively poor performance. IBISWorld Economic Analyst Stephen Hoopes says in the updated report, “subprime loan exposure has hammered banks' balance sheets, causing large write-downs and delaying profit margins from reaching prerecessionary levels.” Industry revenue is anticipated to increase over the five years to 2014; however, this fails to reflect the massive drops in revenue experienced by the industry in both 2008 and 2009. Moreover, mounting external competition is expected to cause industry revenue to fall in 2014. The industry has been consolidating since 1980, and this trend has continued in recent years. During the recession, the industry's largest player, Washington Mutual, failed and was acquired by JPMorgan Chase; the company became the largest bank failure in US history in terms of asset size.
Over the five years to 2019, savings institutions are anticipated to continue to cede deposits to commercial banks; such competition will increase pressure on savings institutions to invest in new technologies and expand product lines to stay afloat. “Additionally, regulation changes will increase capital requirements and supervision for savings banks and thrifts, tempering profit margins through increased compliance costs,” Hoopes says in the updated report. Yet, rising mortgage rates are anticipated to cause industry revenue to grow slightly over the five-year period.
For more information, visit IBISWorld’s Savings Banks and Thrifts in the US industry report page.
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IBISWorld industry Report Key Topics
The industry includes companies that accept customer deposits and place them into interest-bearing products like savings accounts and certificates of deposit (CDs). Industry firms then loan these deposits at higher interest rates through consumer and business loans and make profit on the difference. This industry only covers firms governed by the Office of Comptroller of the Currency; commercial banks and credit unions are not included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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