The big issue to watch in bank reporting season

Intelligent Investor

Increased capital, restrained credit growth and lower interest rate spreads likely mean lower returns for bank shareholders. If you’ve ever wondered exactly how a bank makes money, the above image makes the point rather well. Taken in a Suncorp Bank – owned by Suncorp (ASX:SUN) – branch last week, on the left is a leaflet promoting business loans at a rate of 4.39%. On the right is an advertisement for a term deposit paying 3%. The difference between those sums, known as the ‘interest rate spread’, is one of the key factors determining how much money a bank makes. The higher the spread the more profitable a bank will be. On top of the deposits it holds, a bank has to tip some of its own money (aka equity) into the pot which it lends out – to keep it honest, if you like. Read full article here: (VIEW LINK)


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