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Is This Time Different: How Are Banks Performing during the Recent Interest Rate Increases Compared to 2004-2006? Accessible Data
Figure 1. Federal Funds Effective Rate
Line chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 5.3%. The series begins at about 1, increases to about 5.2 by 2006:Q2, decreases to about 0 by 2009:Q1, stays near 0 until 2015:Q4, increases to 2.4 by 2019:Q1, decreases to about 0 by 2020:Q1, stays near 0 until 2021:Q4, and increases to 5.3 by 2023:Q3.
Source: Board of Governors of the Federal Reserve System (https://fred.stlouisfed.org/series/FEDFUNDS ).
Figure 2a. Net Interest Margin
Line chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 3.5%. The series begins at about 3.5, generally decreases to about 2.1 by 2015 (with a spike in 2009:Q1 to 3.3 driven by new entrants), increases slightly to 2.5 by 2019, decreases to about 1.8 by 2021, and increases to about 2.5 by 2023.
Note: The spike in 2009 is driven by new entrants (Ally, Morgan Stanley, Goldman Sachs, American Express, and Discover). Data are not seasonally adjusted.
Source: FR Y-9C, Call Reports, and internal calculations.
Figure 2b. NIM by Bank Group
Line chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 6.5%. There are 5 lines in the chart. The red double-dashed line, labeled "Credit Card," starts in 2009 at about 4.2, spikes to 6 by 2010, increases steadily to 6.2 by 2019, drops to 5.5 in 2020, and increases to 6.5 by 2023. The orange solid line, labeled "Custody/Investment," is steady around 2 from 2003 to 2008, then decreases to around 1 in 2009 and remains around 1 until 2023. The blue long-dashed line, labeled "Foreign," starts around 4 in 2003, decreases to about 2 by 2014, and increases slightly to about 2.4 by 2023. The purple dotted line, labeled "Regional," starts at about 4 in 2003, decreases to about 2.5 by 2015, increases to about 3 by 2019, decreases to about 2.5 by 2021, and increases to about 3 by 2023. The gray dashed line, labeled "Universal," starts at around 3.5 in 2003, decreases to about 2.5 by 2008, increases to about 3.5 by 2010, decreases to about 1.8 by 2022, and increases to about 2.5 by 2023.
Note: Bank groups are defined in the Appendix. Data are not seasonally adjusted. Source: FR Y-9C, Call Reports, and internal calculations.
Figure 3a. Total Assets Decomposition (nominal)
Area chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 21B$. There are 4 areas in the chart. The gray area, labeled "Total Loans," starts at about 3.5 and increases mostly steadily to about 7.8. Above gray is red, labeled "Securities," the top of which starts at around 5 and increases to about 12. Above red is pink, labeled "IBB," the top of which starts at around 5 and increases to about 14.5. Above pink is blue, labeled "Other," the top of which starts around 7 and increases to about 20. Total Loans are the biggest category, followed by Other, Securities, and then IBB.
Source: FR Y-9C, Call Reports, and internal calculations.
Figure 3b. Total Assets Decomposition (proportion)
Area chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 1. There are 4 areas in the chart. The gray area, labeled "Total Loans," starts at about 0.5 and is steady until 2008, decreases to about 0.4 by 2009, remains around 0.4 until 2020, and decreases to about 0.35 by 2022. Above gray is red, labeled "Securities," the top of which starts at around 0.7 and decreases to about 0.6 by 2009, staying around there for the rest of the series. Above red is pink, labeled "IBB," the top of which starts at around 0.7, decreasing to about 0.65 by 2009, and increasing to about 0.7 by 2023. Above pink is blue, labeled "Other," the top of which is at 1 for the entire series. We see that over the time period of interest, total loans have decreases as a proportion of total assets, while securites and interest-bearing assets have grown.
Source: FR Y-9C, Call Reports, and internal calculations.
Figure 4. Interest Rate Yields on Interest-Bearing Assets
Line chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 8%. There are 4 lines in the chart. The red solid line, labeled "Loans," starts around 6 in 2003, increases to about 8 by 2008, decreases to about 4.5 by 2016, rises to about 5.5 by 2019, decreases to about 4 by 2021, and increases to about 7.5 in 2023. The green two-dashed line, labeled "Securities," starts around 5 in 2003, increases to about 8 by 2008, decreases to about 2.5 by 2016, increases to about 3.5 by 2019, decreases to about 1.5 by 2021, and increases to about 5 by 2023. The blue dashed line, labeled "Interest-Bearing Balances," starts at around 2 in 2003, increases to about 6 by 208, decreases to about 0.5 by 2010, stays around 0.5 until 2016, increases to about 1.5 by 2019, decreases to about 0 by 2020, and increases to about 5 by 2023. The gray dotted line, labeled "Federal Funds Rate," is the same line from Figure 1. We see that loans tend to have the highest yields, followed by securities and then interest-bearing balances.
Source: FR Y-9C, Call Reports, Board of Governors of the Federal Reserve System (federal funds rate), and internal calculations.
Figure 5a. Total Funding Decomposition (nominal)
Area chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 20B$. There are 4 areas in the chart. The gray area, labeled "Non-Interest-Bearing Domestic Deposits," starts at about 0, increases starting in 2008 to about 2 by 2020, increases to about 4 by 2022, and decreases back to about 3 by 2023. Above gray is red, labeled "Interest-Bearing Domestic Deposits," the top of which starts at around 3 and increases to about 8 by 2020, increases to about 11 by 2022, and decreases to about 10 by 2023. Above red is pink, labeled "Interest-Bearing Foreign Deposits," the top of which starts at around 3.5 and increases to about 9 by 2020, increases to about 13 by 2022, and decreases to about 12 by 2023. Above pink is blue, labeled "Other Liabilities," the top of which starts around 6 and increases to about 15 by 2019, increases to about 20 by 2022, and decreases to about 19 by 2023. IB Domestic Deposits are the biggest category, followed by Other, non-IB Domestic Deposits, and then IB Foreign Deposits.
Source: FR Y-9C, Call Reports, and internal calculations.
Figure 5b. Total Funding Decomposition (proportion)
Area chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 1. There are 4 areas in the chart. The gray area, labeled "Non-Interest-Bearing Domestic Deposits," starts at about 0, increases starting in 2008 to about 0.15 by 2016, increases to about 0.18 by 2022, and decreases back to about 0.15 by 2023. Above gray is red, labeled "Interest-Bearing Domestic Deposits," the top of which starts at around 0.45 and increases from 2009 to about 0.55 by 2022, and decreases to about 0.5 by 2023. Above red is pink, labeled "Interest-Bearing Foreign Deposits," the top of which starts at around 0.5 and increases starting in 2008 to about 0.65 by 2022, and decreases to about 0.6 by 2023. Above pink is blue, labeled "Other Liabilities," the top of which is at 1 for the entire series. We see that over the time period of interest, non-IB domestic deposits have increases as a proportion of total assets, while "other" has decreased.
Source: FR Y-9C, Call Reports, and internal calculations.
Figure 6. Interest Rate Funding Costs on Interest-Bearing Liabilities
Line chart, 2003:Q1 to 2023:Q3. Data are quarterly. Y-axis ranges from 0 to 6%. There are 4 lines in the chart. The red solid line, labeled "Other Borrowed Money/Trading," starts around 2 in 2003, increases to about 4.5 by 2006, decreases to about 1.5 by 2015, increases to about 2.5 by 2019, decreases to about 1 by 2022, and increases to about 4 by 2023. The green two-dashed line, labeled "Foreign Deposits," starts around 1.5 in 2003, increases to about 2.7 by 2008, decreases to about 0.5 by 2016, increases to about 1 by 2019, decreases to about 0 by 2022, and increases to about 3 by 2023. The blue dashed line, labeled "Domestic Deposits," starts at around 1.5 in 2003, increases to about 3 by 2008, decreases to about 0 by 2016, increases to about 1 by 2019, decreases to about 0 by 2022, and increases to about 2 by 2023. The gray dotted line, labeled "Federal Funds Rate," is the same line from Figure 1. We see that OBM/Trading tend to have the highest costs, followed by foreign deposits and then domestic deposits.
Source: FR Y-9C, Call Reports, Board of Governors of the Federal Reserve System (federal funds rate), and internal calculations.
Figure 7. Histograms of Deposit Betas for Two Interest Rate Environments
Two histograms covering two periods: 2004:Q2-2006:Q2 and 2021:Q4-2023:Q3. The histograms plot deposit betas for the banks in the sample for each period. Deposit beta = change in deposit rate/change in federal funds rate. The histogram for the 2021:Q4-2023:Q3 period shows more dispersion.
Source: FR Y-9C, Call Reports, Board of Governors of the Federal Reserve System (federal funds rate), and internal calculations.
Figure 8. Histograms of OBM/Trading Rate Betas for Two Interest Rate Environments
Two histograms covering two periods: 2004:Q2-2006:Q2 and 2021:Q4-2023:Q3. The histograms plot funding cost (OBM and Trading Rate) betas for the banks in the sample for each period. Funding cost beta = change in funding rate/change in federal funds rate. The histogram for the 2021:Q4-2023:Q3 period shows higher response to changes in interest rates.
Source: FR Y-9C, Call Reports, Board of Governors of the Federal Reserve System (federal funds rate), and internal calculations.