In S&P's Capital IQ, Todd Cuppia explains how the increase in deposits on bank balance sheets creates an incentive
- August 25, 2021
- S&P Capital IQ
Todd Cuppia spoke to S&P's Capital IQ about how banks can prepare for the opportunities created by the surge in deposits sitting on their balance sheets.
S&P Capital IQ
"The increase in deposits creates an increased necessity to think about [investing] as an alternative because the more that the cash on your balance sheet grows, the more you have a profit incentive to do something with that cash as opposed to just leaving it at the Fed," said Todd Cuppia, a managing director at Chatham Financial
Some banks have said the persistent strength in deposit inflows has led them to rethink how aggressively to boost securities portfolios.
"The increase in deposits creates an increased necessity to think about [investing] as an alternative because the more that the cash on your balance sheet grows, the more you have a profit incentive to do something with that cash as opposed to just leaving it at the Fed," said Todd Cuppia, a managing director at Chatham Financial who leads the firm's balance sheet risk management practice. "The banking industry in general will have to think about how comfortable it is going out on the yield curve, whether that's in the bond portfolio or in the loan portfolio."
Cuppia said that banks have to be prepared for potentially abrupt shifts in interest rates and liquidity conditions. Many are pursuing hedging strategies such as pairing long-dated bond purchases with swaps that exchange fixed-rate payments for floating rates, kicking in after two years.
Balance Sheet Risk Management
Chatham’s end-to-end Balance Sheet Risk Management solution provides the tools needed to manage interest rate risk. A true partner to our clients — not a broker-dealer — our objective is helping you grow faster, compete more effectively, and optimize your balance sheet. We have a deep understanding of the economic, accounting, and regulatory implications of your interest rate risk management decisions. Working with more than 200 financial institution clients, we have unparalleled asset and liability management expertise needed to handle your complete risk management program, including strategy development, trade execution, regulatory compliance, and accounting.
Our featured insights
Engage with Chatham at AOBA 2022
Visit our booth and join us for our panel discussion and networking at the Acquired or Be Acquired conference from January 30 - February 1.
Hawkish Fed minutes send rates higher
In a volatile start to the new year, the major U.S. equity indices fell from record highs with the Nasdaq Composite Index recording its worst weekly close in nearly a year. Bonds across the curve sold off as investors pulled forward expectations for the start of the rate hiking cycle and priced...
American Banker asks Matthew Tevis about LIBOR alternative rates
As SOFR gains ground with community and regional banks, Matt Tevis discusses with American Banker what will happen with leading LIBOR alternative rates.
Quiet week marks end to solid year for equities
The major U.S. equity indices ended the year on a high note, capping an end to a stellar year for equity returns, while treasury yields advanced modestly across the curve in a light week for trading to end the year notably higher than where they began. The three major U.S. equity indices notched...
Fed turns hawkish; Manchin imperils the Build Back Better Act
In a week packed with economic data releases, the FOMC monetary policy meeting, and political wrangling in Washington, the major U.S. equity indices, along with Treasury yields, moved lower on the week.
CPI runs hot, Congress paves way for debt ceiling resolution
The major U.S. equity indices snapped two consecutive weeks of declines with the S&P 500 notching its best week since February as investors’ omicron variant fears seemingly subsided and Friday’s inflation reading fell in line with analyst estimates.
Chatham Financial announces CEO transition effective January 2022
Matt Henry named the next Chatham CEO
Jim Andersen joins Chatham to focus on his passion for helping financial institutions through the use of derivatives
Jim Andersen joins Chatham’s Financial Institutions advisory practice with over a decade of experience to assist bankers in their origination efforts through the prudent use of interest rate derivatives.