loan-to-deposit

As some jump for joy over a receding recession (depression), market watchers wonder why regional bankers are prematurely celebrating. The minor detail generally missed concerns loan-to-deposit rations; in other words, a way to indicate how much a bank depends on external finances coneys a free fall as more consumers save, and regional banks loan out less.

Executive by the likes of KeyCorp, Marshall & Ilsley Corp. and First Horizon Nation Corp. may stand by claims that the falling ratios of yester-quarter fostered a boost in margins and liquidity, but objective analysts see straight through the garbage. They drew attention to the fact that a such trend indicates weak lending, and deposits headed toward less-profitable alternate routes.

Regional banks celebrate to the market watcher's dismay

In a nutshell, more money has gone in to regional banks than out, which has rendered them saturated in liquidity, desperately scrounging juice margins by slashing rates on checking and savings accounts. The fact is that banks aren’t giving anybody loans; in conjunction with unemployment and widespread household vacancies, the prospects for consumer and commercial growth are insubstantial.

The chief investment officer at Point View Financial Services Inc., David Dietze, tied dreadful consequences to the plummeting ratio, which could drastically affect the economy: “over-saving and under-lending can lead to deflation.”