As summer unfolds, Major League Baseball teams are deep into the season, with many already out of the playoff race. Teams below .500 find themselves unable to qualify even through the wildcard route. However, in Atlanta, the atmosphere is electric among Braves fans, who are celebrating a team poised to make a significant playoff push.
The Braves lead the entire league, claiming the best record in baseball and an impressive 13.5-game lead in the National League East with only 30 games remaining. The path to the playoffs appears almost certain for the Braves at this stage.
Several players are having career-best years, with Matt Olson leading the league in runs batted in and ranking second in home runs. Ozzie Albies, Austin Riley, and Marcell Ozuna are also performing exceptionally well.
On the pitching front, Spencer Strider is dominating the mound, leading in both strikeouts and wins against opposing batters.
The standout performer, however, is Ronald Acuña Jr. This 25-year-old right fielder is making headlines, leading the league in on-base percentage, stolen bases, and runs scored. He consistently gets on base, steals with ease, and crosses home plate faster than his competitors.
Acuña has recently joined an elite club, becoming the fourth player ever to steal more than 60 bases and hit over 20 home runs in the same season. The last to achieve this remarkable feat was Rickey Henderson in 1990, seven years before Acuña was even born.
Furthermore, if Acuña hits one more home run, he will break new ground as the first player in history to steal 60 bases and hit 30 homers in a single season. The likelihood of him achieving this milestone seems promising, and by the time you read this, it might already have happened.
Live, Work, and Play
Baseball has stood the test of time and remains a source of excitement and achievement. The accomplishments of players like Acuña provide a collective cheer for fans as autumn approaches amid a banking sector facing potential challenges.
Truist Park, the home stadium of the Atlanta Braves, opened in 2017. It’s a modern venue offering not only functional amenities but also aesthetic appeal with water features, self-checkout concessions, and its own Wi-Fi network.
Nestled nearby is The Battery Atlanta, a mixed-use entertainment complex made possible by previous years of easy credit. This design embodies the concept of a “15-minute city” where residents can live, work, and play, a model that urban planners advocate as a better alternative to sprawling suburbs.
At The Battery, you can shop and enjoy a variety of dining options within walking distance. But the entertainment doesn’t stop there…
You can indulge in different activities, from enjoying drinks at bars to watching movies, bowling, honing your golf skills, or tackling an escape room, among many other options.
Once you’ve had your fill of fun, you can head over to Truist Park to cheer on the Braves as they aim for victory, joining fellow fans in the iconic Tomahawk chop.
While some critics argue that the chop mocks Native American culture, to Braves fans, it’s all in good spirit.
Something Terrible
The stadium’s name, Truist, derives from Truist Financial, a banking entity established four years ago but with roots back to the 19th century.
Truist Financial came into being in December 2019 through the merger of BB&T (Branch Banking and Trust Company) and SunTrust Banks. It currently operates over 2,780 branches across 15 states.
Ranked as the ninth-largest bank in the U.S. with $514 billion in assets, Truist’s offerings include a range of consumer and commercial banking services, securities brokerage, asset management, and mortgage as well as insurance services.
While this might sound impressive, underlying issues could be troubling. Recently, Moody’s, a credit rating agency, downgraded the ratings of 10 small to mid-sized banks and changed the outlooks for 11 others from stable to negative, including Truist Financial.
Reasons for these downgrades varied. For Truist and U.S. Bancorp, low capital reserves were cited, while significant outflows of non-interest-bearing deposits were the concern for State Street and BNY Mellon.
Taking Scalps
What exactly does it mean to put banks under review for potential downgrades? It’s a perplexing question.
Perhaps this is Moody’s method of easing the impact of forthcoming credit downgrades for some of America’s prominent banks. Regardless, the implications are rarely positive. It suggests that Truist and similar banks may be burdened with underperforming loans.
Rising interest rates have compressed net interest margins, with the income from loans failing to outpace payouts to depositors. This has led to negative spreads.
After a series of Federal Reserve rate hikes over 18 months, the traditional lending model has faltered, with short-term yields surpassing long-term ones. Consequently, banks that depend on short-term borrowing to provide long-term loans are experiencing negative carry.
For banks like Truist, the straightforward remedy would be a steep and simultaneous reduction in short-term interest rates, which would restore net-interest margins. However, such a shift seems unlikely in the near future.
Recent reports indicate that the Fed’s core inflation measure, the Core PCE Deflator, rose by 4.2 percent in July compared to the previous year, an increase from the 4.1 percent in June. As a result, the Fed is likely to maintain its high-interest-rate approach to combat inflation.
The question that arises is how long banks can withstand these higher rates. A continued increase in rates could exacerbate negative carry and heighten the risk of further downgrades.
Currently, Truist Financial’s stock has plummeted approximately 30 percent since the beginning of the year. With a P/E ratio of 7.06 and a dividend yield of 6.88 percent, investors must weigh the potential rewards against the evident risks. How optimistic do you feel?
While Braves fans celebrate their team’s successes, investors in Truist Financial, comparable to settlers facing challenges during pivotal historical moments, are undeniably vulnerable.
It appears that a minor shift—perhaps just 50 basis points—could leave them exposed to sharp losses.
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Sincerely,
MN Gordon
for Economic Prism
