We anticipate 2014 to be the year for CFOs to more enthusiastically leverage data and analytics to drive profitability and capital allocation decisions.
Going forward, earnings are likely to be challenged on multiple fronts. One such headwind is likely to be interest rate volatility. Banks are unlikely to realize better yields from rising rates until the economy drives sufficient loan demand. In the meantime, rising rates are reducing demand for mortgages, further hindering revenue growth.
CFOs could also be challenged to manage interest rate risk in the securities portfolio. Aside from developing prudent interest rate strategies, banks must consider some of the related accounting implications as well. While losses from the available-for-sale portfolio may hurt
capital, classifying securities as held-to-maturity could impact liquidity and saddle a bank with lower yielding assets as rates rise. Interest risk will likely continue to be a focus for many banks.