Telis Demos
speaker
656 appearances
10 recordings
1 series
first heard Jun 2018
last heard Dec 2024
Telis Demos’s voice in public audio — every appearance, attributed to the second.
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Appearances
That's sort of a defensive move from them.
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But those banks were the ones at the very bleeding edge of what rates were being offered to consumers in deposit accounts, like Ally Bank, Goldman Sachs' Marcus.
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They were already offering some of the highest rates in the market.
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And so them coming down a little bit doesn't necessarily really help the banks that were paying on the lower end because they might still face pressure from people paying lower
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from what Ally and Marcus are still offering, right?
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They're still offering somewhere in the neighborhood of 2%.
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That's obviously a lot better than the 0.01% or 0.05% that you might currently be getting in a checking or savings account.
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So rising rates do help banks because they can charge more money potentially to borrowers.
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However, something else is happening that's making life hard for the banks, and that's the flattening of the yield curve.
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The flattening of the yield curve basically means that short-term rates are coming up and long-term rates are coming down.
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And so it sort of evens out, which means that the banks, which typically lend out money at long-term rates and borrow money at short-term rates,
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are seeing less of a difference between those things.
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So even if rates rise, they're both rising kind of around the same, right?
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The long-term rates and the short-term rates are both going up about the same rather than what banks would hope to see, which is long-term rates rising a lot more than short-term rates.
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That's really the – I mean an individual bank's profit is driven by lots of things, what their costs are and things like that.
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But the core basic business of banking of taking money into deposit and lending it out is really closely related to those two things, to the interest rates that they are getting on loans and that they're paying to depositors and the steepness of the interest rate curve.
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The news isn't all bad for banks.
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One thing that's been fantastic for banks is that most people are paying back their loans.
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One of the biggest risks the banks face is that they lend money out and it doesn't come back in.
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These days, it seems like consumers and businesses are paying their loans back at
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