Rising Treasury Yields Force US Banks to Cut Buybacks
US banks are delaying share repurchases and facing billions in unrealized bond losses as Treasury yields hit their steepest rise since 1994.
A sharp increase in U.S. Treasury yields is pressuring American banks to choose between selling bond portfolios at a loss or carrying unrealized losses on their balance sheets. The 10-year Treasury yield saw its steepest rise since 1994 during the third quarter, which deepened negative accumulated other comprehensive income balances across the industry.
Bank of America reported that its unrealized losses grew to $109 billion by the end of September, up from $85 billion in June. This financial strain has directly impacted shareholder returns. Fifth Third delayed a planned share repurchase in September, while Wells Fargo indicated that future buybacks are contingent on the interest rate environment.
Other institutions are adjusting their strategies in anticipation of the Basel III international regulatory framework. Truist has been repositioning its securities portfolio and considering further sales, while PNC Financial Services is factoring the new capital rules into its evaluation of holdings.
