The onset of higher interest rates, now at their highest consistent level for 20 years, should have been a boom time for banks, which had previously struggled in the cheap money era after the financial crisis. But larger lenders’ recent results season underlined the challenges even in today’s macro and competitive backdrop. First is the difficulty of succeeding outside a domestic market. Second is the importance of keeping the net interest margin (NIM) under control: the banks that produced indifferent results were those that had little or limited apparent control over their funding or operating costs.
- Growth at a reasonable price
- Lessons learned from financial crisis
- Client relationships reduce churn
- Solid balance sheet and capital ratios
- Cannot control rates
- Deposit market competition
Bearing this in mind, it is now worth looking seriously again at Paragon Banking (PAG). The lender’s March year-end means its results aren’t due until early June, but its recent updates have underlined some key features that elevate it above the competition.