There is a brutal feeding frenzy occurring in the banking industry today: the complete commoditization of mainstream commercial and commercial real estate lending. Like a pack of vultures picking at the flesh of a potential new mini-perm deal or term loan, liquidity-rich banks are feverishly bidding down pricing into the zone of shareholder destruction. We see fixed-rate deals for 7 to 15 year terms that carry coupons lower than many banks’ net interest margins. Despite calls for sanity from every senior loan committee across the country, the brinksmanship continues. Business customers have grown savvy, and even the most loyal now send their credit needs out onto the street for competitive RFP bids. Loyalty these days seems to buy about 10 basis points for the banker.
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