AFS Pricing Charts of the Month March

The commercial banking industry has endured several economic and structural challenges over the last several months. Many banking executives remain bearish on commercial loan growth, citing concerns about credit quality and a scarcity of new lending opportunities. And while borrower demand remains subdued by historical standards, C&I outstandings growth and line of credit utilization both strengthened in March. In light of these trends, an increasing number of banks are looking to reverse the prior year’s declines. A renewed emphasis on growth often coincides with an increase in pricing competition. Such a trend was seen in the March results, in which the weighted average SOFR-equivalent spread for investment grade C&I loans narrowed significantly from the beginning of the year. Deposit competition also remains intense, further pressuring bank NIMs. The timing of relief in the form of interest rate cuts is now uncertain given higher than expected inflation in March and cautious remarks from the Fed. Banks more than ever are challenged to grow top-line revenue without adversely impacting spread and credit quality.