Jan 21, 2023

You know what’s scary?

Jan 21, 2023 | Brian's Blog

You know what’s scary?
Riding 20ft waves on a tiny boat in Colombia.

You know what’s not scary?
Deposit to Loan Ratios.

A few years ago I was visiting Colombia with my family and we decided to visit a National Park and we would take a little boat to get there.

What a great idea!
Until it wasn’t….

Before I know it, our little dingy is riding 20 ft waves like a roller coaster.
We’re all terrified.
But I noticed the captain wasn’t…

You know why?
Because he deals with this every day.
He knows things are going to be fine.

Too many people are treating the current loan to deposits situation like I was before I noticed our captain –
Terrified of the risk of the unknown.

The 1 difference here:

This is NOT an unknown.
We’ve been here before.
And it hasn’t even been that long…

Banks continue, on average, to have low loan-to-deposit ratios.
In other words, they have plenty of raw material (deposits) to make loans.
The loan demand has not outstripped supply.

Just look at the graph below.
See that little bump at the end?
It’s nothing but a slight correction,
Not a 20 ft wave on a dingy in Colombia.

Deposits come and go. Deposit pricing goes up and down.
None of this is a cause for alarm.

Banks are still flush with deposits.

Get back to identifying loan demand to get a yield on those surplus deposits!

Learn more 

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