Recent reports indicate that bank analysts, along with many other interested parties, will be watching closely the ability of banks to generate sources of fresh capital in 2009. It is understood that due to the large provisions made to the loan loss reserve in the fourth quarter of 2008 that capital ratios will be understandably lower. Analysts have indicated that they will now be watching these ratios to see which organizations will be able to increase capital, and more importantly what is the source of the capital increase. Basically they will be looking to see which organizations have the ability to generate sustainable sources of capital increases.
Retained earnings continues to be a great source of capital; therefore many organizations will once again begin looking to all lines of business for both increases in top-line and bottom-line revenue. Until the credit and liquidity issues are addressed, non-interest income generators will be called upon to assist in delivering increased revenue results. As with any business venture, various risks must be undertaken to produce results. As a professional within the financial services industry, you must ask the following question: Are we generating optimal risk adjusted revenue for the service we provide?
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