What are banks total assets?

Total assets, in the context of a financial institution like a bank, refer to the combined value of all the assets or resources owned or controlled by that bank. Assets are items of economic value that a bank uses to generate income and conduct its operations. These assets can include:

  1. Cash and Cash Equivalents: This includes physical cash, deposits with other banks, and highly liquid investments that can be easily converted to cash.

  2. Loans and Advances: The money that the bank lends out to borrowers, such as individuals, businesses, and other financial institutions.

  3. Investments: This category includes securities, stocks, bonds, and other financial instruments that the bank holds as investments.

  4. Physical Assets: These can include real estate holdings, office buildings, and other physical properties owned by the bank.

  5. Other Assets: This category encompasses a wide range of assets, including goodwill, intangible assets, and other miscellaneous items.

The total assets on a bank’s balance sheet represent the sum of all these different asset types. It’s a key indicator of the bank’s size and financial strength. Larger total assets generally indicate a larger and more influential financial institution, while smaller total assets typically correspond to smaller banks or credit unions.

Banks use these assets to generate income through lending, collecting interest and fees, and making investments. Understanding a bank’s total assets is important for assessing its financial stability and capacity to meet its financial obligations, such as repaying depositors and other creditors.

As you can see on chart above assets are contracting from Q1 2022, situation last seen during Great Financial Crisis. 

Why banks are decreasing their U.S. Treasury Securities position?

Interest Rate Expectations: When banks anticipate that interest rates will rise, they may sell their existing Treasury holdings because these securities tend to lose value when rates increase. Banks want to avoid capital losses on their investments. 

Liquidity Needs: Banks may need cash for various purposes, including covering customer withdrawals (deposit outflows) or lending to businesses and consumers. Selling Treasury securities provides a source of liquidity.

They bought too much securities during low rates. And they are offloading with losses now. 


How does bank condition look like?

Charege-Offs are rising from Q4 2021, but they are still on historically low levels. 

What are bank charge-offs?

Bank charge-offs refer to the accounting practice where a financial institution, such as a bank or credit card company, recognizes a loan or credit card balance as unlikely to be collected and removes it from its books as a loss. In other words, it is the process of writing off a debt as uncollectible and declaring it as a loss on the bank’s financial statements. Here’s what you need to know about bank charge-offs:

  1. Recognition of Loss: When a bank determines that a borrower is unlikely to repay a loan or credit card debt, typically after a prolonged period of nonpayment or delinquency, the bank will charge off that debt. This accounting action acknowledges that the debt is no longer considered a performing asset.

  2. Impact on Financial Statements: The amount of the charge-off is subtracted from the bank’s total assets on its balance sheet, reducing its overall asset base. At the same time, the bank recognizes the charge-off as an expense on its income statement, which reduces its net income for that period.

  3. Recovery Efforts Continue: Even though a debt has been charged off, the bank will often continue its efforts to recover the amount owed through collection agencies or legal means. However, from an accounting standpoint, the debt is no longer considered an asset of the bank.

  4. Regulatory Compliance: Banks are subject to regulatory requirements that dictate when and how they must charge off bad debts. These regulations are designed to ensure that banks accurately reflect the quality of their loan portfolios and maintain transparency in their financial reporting.

  5. Credit Reporting: A charge-off has a significant negative impact on the borrower’s credit report and credit score. It indicates to other lenders that the individual failed to repay a debt as agreed, making it harder to obtain credit in the future.

It’s important to note that while a charge-off means the bank no longer considers the debt recoverable for accounting purposes, it doesn’t necessarily mean the borrower is absolved of the debt. Borrowers are still legally obligated to repay charged-off debts, and banks may continue to pursue collection efforts or sell the debt to third-party collection agencies.

Charge-offs are a reflection of credit risk and the bank’s assessment of the likelihood of recovering the debt. Banks aim to manage and minimize charge-offs through prudent lending practices and risk assessment, but they are an inevitable part of lending operations, especially in economic downturns or during periods of financial stress for borrowers.