Commercial_and_Trust_Banks_Diverge - JANUARY 20, 2011...

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JANUARY 20, 2011 Commercial and Trust Banks Diverge Quarterly Results Show Disparity in Firms' Ability to Capitalize on Low Rates; the Mortgage Boost By DAN FITZPATRICK Historically low interest rates—banks love 'em and hate 'em. For any bank, whether a commercial lender or a trust, low rates are trimming yields and pressuring margins. But the same rates are allowing the biggest consumer banks to juice earnings with refinancings and more profitable new mortgages despite concerns about faulty foreclosure documentation and mounting demands to repurchase bad loans. Two consumer-heavy banks, Wells Fargo & Co. and U.S. Bancorp , reported fourth- quarter earnings Wednesday that leapt 21% and 62% respectively, to $3.41 billion and $974 million. Both originated more mortgage loans and earned more income from those units as low rates boosted demand. Arguably, even bad mortgages had some upside: Both banks released loan-loss reserves as delinquencies eased. The trust banks, which largely manage assets and lend securities to other institutions, didn't fare as well. State Street Corp. and Northern Trust Co. reported fourth-quarter profits dropped as compared to a year ago. Northern Trust's chief executive cited the "persistent low-interest rate environment" as among the reasons why earnings fell 22% to
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This note was uploaded on 03/18/2011 for the course FIN 615 taught by Professor Yan during the Spring '11 term at New York Institute of Technology-Westbury.

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Commercial_and_Trust_Banks_Diverge - JANUARY 20, 2011...

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