Wall Street is going to face some big questions over the next several months, and Deutsche Bank is laying them all out for banking executives to consider.
Deutsche Bank analysts this week published their quarterly "Question Bank" report, where they outline what they see as the biggest issues for Wall Street banks in the months ahead.
Big financial institutions are under pressure, from looming layoffs, to lower-for-longer interest rates. Deutsche Bank covers everything from how much interest banks earn on assets they own, to the rising use of automated systems to do what humans used to do.
Interest rates are next to nothing. So how much interest income are you making?
It's not a question for any one Wall Street bank, so much as it is an issue for all of them — especially the consumer banks. Net interest margin, or NIM, is how much interest is generated by banks' interest-earning assets. And in today's very low-interest rate environment, NIM has been under pressure for years. Deutsche Bank analysts had equally unappetizing questions for all of Wall Street, either of which has the potential to crimp revenue: "If short term rates rise, but long term rates decline, what happens to bank NIMs?" And, if they do not, "how much further NIM pressure is there?"
The Deutsche Bank analysts pointed out that net interest margins, which are expected to rise when interest rates rise, have been under pressure this year and will continue to experience pressure for the rest of the year. It's a question on other analysts' minds as well, and one banks may have to address on future earnings calls.