Banks reporting for duty (part deux)

Banking is a great business, as long as you're not doing any actual banking

• Another big bank delivers, but it didn’t do much “banking”

• banking is really real estate lending, and if you’re not doing that, what are you doing?

• data center construction doubles

• Bank OZK is the real estate lender to Florida, which is making people nervous, but can you really blame them?

• Has CRE found its trough?

---

👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. 

Banks reporting for duty (part deux)

What is banking without lending?

A good business, apparently.

Another big bank reported a smashing quarter of investment banking and trading fees.

This time it was Goldman Sachs, which more than doubled its earnings with a mix of trading, advisory work, and wealth management.

What Goldman did not do (by design), was a lot of traditional “lending,” or the thing we typically associate with banks.

Lending was “unchanged” QoQ (but NIM did rise substantially, so that’s nice).

Goldman is doing it’s thing wheeling and dealing, and it was never much of a traditional lender in the first place, so none of this is terribly surprising (even if the results are impressive).

What is lending without real estate?

Random Walk really makes the observation to continue ruminating on the theme: fees, trading and the like are great alternative sources of revenue for the investment banks (for now, at least), but what about the bank banks? You know, the ones who take deposits and lend against those deposits, and do what is generally regarded as “banking.”

What, if anything, is the future for that sort of banking? Regional banks are/were so focused on real estate lending that you might as well call them “real estate banks,” and real estate lending is currently in the pits. If banks can’t make a living off lending to real estate, then what will they do instead?

Two charts from the St. Louis Fed highlight how linked “traditional” banking is with real estate.