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)


Comments

Please sign in to comment on this wire.