visimoney
TLDR:
- Banks in equipment finance facing challenges due to skyrocketing interest rates, deposit declines, and reserve requirements
- Bank failures and economic headwinds impacting the industry
Rita E. Garwood, editor in chief of Monitor, discusses the future of banks in equipment finance. Banks have been increasing their presence in the industry through mergers, acquisitions, and hiring experienced leadership teams. However, challenges such as skyrocketing interest rates, deposit declines, and reserve requirements have put pressure on banks. The regional banking industry faced challenges in 2023 due to 11 interest rate hikes by the Federal Reserve, affecting liquidity and borrowing costs. The decline in deposits and increasing reserve requirements have further impacted banks, leading to credit quality rating revisions. Bank failures in 2023, including that of Signature Bank, have raised concerns about cryptocurrency deposits and loan-to-deposit ratios. The impact on customers includes rate volatility and supply chain challenges. The commercial real estate exposure of banks, particularly in non-owner occupied properties, is another concern.
Experts predict that banks may adopt more conservative approaches, reducing their involvement in equipment finance. Some banks have already scaled back operations, while others are focusing on their core equipment finance market. Private credit funds may play a larger role in syndications, potentially increasing borrowing costs. The future of equipment finance will depend on how banks navigate challenges and adapt to changing market conditions.
