Leverage Up
We forget how heavily banks were leaning into the ropes at the height of the credit crisis. The talk of mass failures was not just idle chatter — it was a real possibility.
And that is why it is notable how the commercial banking game has changed. In today’s US Bancorp earnings call, Richard Davis, the bank’s CEO, gave a hint to just how hard banks are starting to hit back. When Davis was asked about commercial banking products, and how USB was increasing sales in those products, Davis explained how leverage has changed. He said, with USB’s balance sheet, it has in some cases been the “last bank in the syndication,” and that enables USB to “get other banking business.”
This is a tough scenario painted by USB. A commercial enterprise is looking for loan syndicate participants. That enterprise is close to securing the syndicate, but needs that one additional participant. And then USB comes in. That is quite a position of power that USB occupies. “Get other banking business” might be an understatement.
That’s a glimpse at what’s to come in commercial banking, at least in the near term — and by near term, I mean until that overwhelming need to lend depositary funds displaces fear and prudence. Leverage has absolutely swung to the banks. Oh, how far we have come.
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