The ability to raise capital from investors may have distinguished banks from credit unions in the past, but no longer. A speaker at the Bank Holding Company Association’s fall seminar explained that the cost of capital now exceeds the typical community banks’ return on equity. Steven Kent of River Branch Capital, Chicago, was essentially saying that the return on an investment in a community bank is not lucrative enough to attract investors. Lower return on equity means more bank owners will need to retain earnings in order to build capital. They will not be able to . . .
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