Equities

Bank Series

Higher interest rates mean higher incomes for the banking sector.

 

about SERIES

512

DAYS Active

14

Securities

7.1

Day's RESULT

-33.4

TOTAL RESULTS

Deeper Dive

The banking sector's profitability increases with interest rate hikes. Institutions in the banking sector, such as retail banks, commercial banks, investment banks, insurance companies, and brokerages have massive cash holdings due to customer balances and business activities. Increases in the interest rate directly increase the yield on this cash, and the proceeds go directly to earnings. 

Updated on 6/24/2022

Higher interest rates directly increase the yield on cash holdings, and that helps boost earnings. Banks with a higher net interest margin will benefit from rate hikes more than those with a narrower spread.

Interest rate hikes are the most important macroeconomic variables to the profitability of the banking sector. Federal Reserve rate increases boost bank profitability by increasing the net interest margin (NIM) and effectively increasing banks' net interest income

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