During this
Doing so can expose banks to grave damage if rates suddenly lurch up, of course. Regulators have
“You can begin to take some more rate risk in that type of situation,” BB&T CEO Kelly King noted in a presentation in March. “You can extend maturities.”
“Can” is not the same as “should.” Regulatory data shows large banks, including BB&T (BBT), have not piled into long bonds despite an era of low rates the Fed looks
Among roughly 50 companies with more than $10 billion of assets, securities that mature or reprice in more than five years have accounted for about 60% to 70% of total securities since late 2003.
The figure hit the upper end of the range in 2007 as the Fed pivoted away from a tightening phase, and fell to about 61% in the fourth quarter. Over the same period, the representations of securities maturing in less than one year or in one to five years both edged up by about 5 percentage points, to about 20% each.
Meanwhile, the aggregate securities yield for the group has
In contrast to the gradual shift in the mix of investments among the combined group, which had $1.7 trillion in total securities at yearend, some individual banks have radically changed maturity profiles over the past few years.
Huntington Bancshares (HBAN) appears to have swung sharply toward short- and intermediate-duration bonds, for instance, according to numbers it posted with bank regulators.
The securities figures are an imprecise read on a bank’s actual positioning, however. They say nothing about interest rate swaps, and are incomplete without information on the maturities of liabilities and other assets. Moreover, regulatory figures do not account for prepayment expectations for mortgage bonds, which are fundamental in determining the life of such securities, and can conflict greatly with information in SEC filings.
BB&T, which over the past three years backed off from a buildup of long-term bonds, sold billions of dollars of securities — replacing some with floating-rate investments — in 2010 to defend against the possibility rates will rise.
While it said its entire book of business still stands to benefit from a rise in rates in the first quarter, however, BB&T reported in April that the sensitivity of its securities holdings had rebounded somewhat from yearend.