The National Information Center released consolidated financial statements for bank holding companies for 2Q11.

Even though the information is not as comprehensive as the Quarterly Banking Profile that  includes savings institutions and is soon to be released by the Federal Deposit Insurance Corp., the data provide a good early projection of asset and liability changes at banks, Barclays Capital analysts said.

The top 50 banks by total assets added about $9 billion in agency MBS in the second quarter. Although GNMA and conventional passthrough holdings dropped by $3.6 billion and $10.1 billion, respectively, agency CMO holdings rose significantly by $22.6 billion.

These reflect changes in banks' HTM and AFS securities, according to Barclays analysts. Agency MBS held under the trading account dipped considerably by around $21 billion during the quarter.

Non-agency holdings dropped slightly by $0.3 billion in the same period, while CMBS holdings of the top 50 banks increased by $3.2 billion.

Holdings of US Treasurys and agency debt also dropped, falling $20.9 billion and $11.3 billion quarter over quarter, respectively. 

In terms of the loan front, although residential lending stayed lukewarm, it showed some improvement over the previous quarter, Barclays noted in its report on the findings. Holdings of 1-4 family residential loans rose $1.4 billion, while CRE loans dropped $5.7billion quarter over quarter.

But, C&I loans still showed improvement, increasing by $33.8 billion in the quarter. "We continue to see the trend of tight lending standards for residential credit, and greater willingness to lend for commercial and industrial purposes," Barclays analysts wrote.

Cash and cash equivalents showed another substantial rise this quarter, increasing by $224.7 billion. Total deposits rose by $192.3 billion, and banks still hold a significant amount of cash on their books.

With the Federal Reserve holding the target Fed funds rate low until mid-2013 in the wake of weak economic growth, Treasury yields have dropped considerably.

With weaker NIMs still pressuring banks, Barclays analysts expect greater demand for spread products in the near term, which should translate into strong agency MBS demand. 

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.