For those of us following the interest rate and inflation themes, we've got some more updates. Specifically, following on from last week's Office Hours where we looked at the FCA scrutiny of UK banks for their refusal to pass along profits to savers, it now looks like there is some positive movement in the UK savings market. At the same time, US banks have posted some of their best lending profit figures in years.
Unless something dramatic happens in the news, I will cover these in more detail for next week's commercial article. We can use this thread as a place to anchor our forum discussion of these themes.
In the meantime, here is a brief overview:
UK Savings Rates
Last week, one of the developments we focused on is the concept of spreads or margins. This relates to the cost of credit: banks may pay another bank 3% to borrow money and charge borrowers 8%. This gives them a 5% spread, which is how banks make money on lending.
The FCA — the banking regulator — has not been happy that banks have not offered savers more competitive rates. That is, a lot of the money banks use to lend is from business and retail savers. The rates they offer have been far lower than what they are charging borrowers. As a result, the FCA has asked banks to account for this.
But on Saturday, a new report shows a marginal improvement on savings rates, suggesting that the banks are either preempting any FCA intervention or passing profits onwards of their own accord.
US banking profits
Simultaneously, US banks including JPMorgan, Citigroup, and Wells Fargo have posted $49bn in margin profit. This is 30% higher than this time last year. This demonstrates the extent to which banks benefit from higher interest rate environments. (Though we might ask how these large bank's investment banking divisions are fairing given the relatively low volume of deal activity...).
Unless something dramatic happens in the news, I will cover these in more detail for next week's commercial article. We can use this thread as a place to anchor our forum discussion of these themes.
In the meantime, here is a brief overview:
UK Savings Rates
Last week, one of the developments we focused on is the concept of spreads or margins. This relates to the cost of credit: banks may pay another bank 3% to borrow money and charge borrowers 8%. This gives them a 5% spread, which is how banks make money on lending.
The FCA — the banking regulator — has not been happy that banks have not offered savers more competitive rates. That is, a lot of the money banks use to lend is from business and retail savers. The rates they offer have been far lower than what they are charging borrowers. As a result, the FCA has asked banks to account for this.
But on Saturday, a new report shows a marginal improvement on savings rates, suggesting that the banks are either preempting any FCA intervention or passing profits onwards of their own accord.
US banking profits
Simultaneously, US banks including JPMorgan, Citigroup, and Wells Fargo have posted $49bn in margin profit. This is 30% higher than this time last year. This demonstrates the extent to which banks benefit from higher interest rate environments. (Though we might ask how these large bank's investment banking divisions are fairing given the relatively low volume of deal activity...).
