In a report released on Friday, Barclays Capital analysts highlighted the National Information Center's 1Q12 consolidated financial statements for bank holding firms.
Barclays analysts stated that even though the information is not as comprehensive as the Quarterly Banking Profile, which includes savings institutions (which is going to be released soon by the Federal Deposit Insurance Corp.), the data provide a good early projection of shifts in bank assets and liabilities.
The findings include the fact that the top 50 banks by assets upped their agency MBS holdings in their hold-to-maturity (HTM) and AFS (available for sale) portfolios by $62 billion in 1Q12.
Meanwhile, their conventional and GNMA passthrough holdings picked up $41 billion and $9 billion, respectively. Additionally, the CMO holdings rose by $12 billion quarter-over-quarter.
The large increase was led by Bank of America, which HTM and AFS portfolios of agency MBS rose by more than $30 billion. Most of the gains were from the conventional passthrough area at $25 billion, with comparatively fewer GNMAs at $8 billion.
The agency MBS held under the trading account was reduced to $15 billion in 1Q12.
The top 50 banks' non-agency MBS and CMBS holdings rose $9 billion and $6 billion, respectively. Treasury holdings were up $11 billion, while agency debt holdings saw dips of $7 billion quarter-over-quarter.
Overall, bank portfolio allocations to securities increased $87 billion over the quarter. Meanwhile, the allocations to loans and leases also rose by $65 billion and cash, net fed funds, and reverse repo were down $25 billion.
In terms of the loan books, C&I loans still saw strong growth, rising $44 billion over 1Q12. The 1-4 family first-lien residential loans also rose $19 billion, driven into positive territory by Capital One. The bank increased its holdings by $39 billion.
Agency MBS bank demand is off to a very strong start this year, the Center's findings pointed out. But, with rates still rallying in recent weeks, bank demand for securities can be limited, Barclays analysts stated.
The recent economic outlook softening can lead to lower loan growth, and banks might just choose to deleverage, instead of investing in low-yielding securities.
But, analysts expect further bank demand in agency MBS considering that these are the highest yielding securities in the top credit quality bucket, although the pace of growth in the coming quarters might slow down.