Financing costs for U.S. banks and brokers are on the rise, which will push up the lending rates they apply to their clients, Standard & Poors analysts said today in a report.
Since the fourth quarter of 2007, financing costs for investment-grade banks and brokers have been consistently higher than what is charged to non-financial corporations with the same rating, wrote S&P Managing Director Diane Vazza.
To counteract this, banks have increased their lending rates, Ms. Vazza wrote.
She noted that when banks started reporting write-downs in November 2007, it was the first time the spread of the S&P U.S. investment-grade bank and investment banks composite index widened against the S&P investment-grade composite and industrial composite index.
Higher perceived risk, the need to raise additional capital, and hefty refunding needs have combined to push up the rate at which banks can borrow, Ms. Vazza said wrote, adding that banking spreads are currently at 377 basis points, or 160 basis points wider than on Jan. 1.