Banks - interest rates and profitability

[snabbu]

The last time there was a credit squeeze and interest rates went up the profitability of banks went down. Which is a fairly basic supply and demand issue. However this time because of a global credit squeeze Australian companies are having to borrow from local banks as they can no longer access overseas funds. Does this mean in this credit squeeze that the banks will retain their profitability. Any thoughts? I am tempted to buy some but so far I am watching and waiting.

Cheers

Gary

 

[kyme]

Re: Banks

I think Banks won't see the highs of recent years again for some time probably years. Australia is a debtor nation and our Bank's have to borrow most of funds they lend out from overseas. Global money market rates look like gonna continue to rise. Looks safe bet our banks will this week or next put up their home loan rates more than the .25% of yesterday reserve banks decision. If reserve bank decides to hold rates steady in May our Banks may still raise rates on their own to service their international debts. Not sure how much more downside the Banks have, but pretty hard to see any upside at all. I'm sticking to my oil/gas stocks at moment, look most likely sector to retain/increase profitability to me.

 

[IFocus]

Re: Banks

Andrew West mentions the Banks in today SHM may be of use

http://business.smh.com.au/watch-out-below-is-the-best-investment-advice/20080305-1x1p.html

 

[snabbu]

Re: Banks

Andrew West mentions the Banks in today SHM may be of use

http://business.smh.com.au/watch-out-below-is-the-best-investment-advice/20080305-1x1p.html

Great article very useful, in fact FN arena had a similar article.
If you look at the sub text of what is being said when the asset write downs happen for all companies not just banks stock prices will take another dive.
Solid companies will not go broke but rather be stuck with expensive debt and higher input costs thereby small returns. It almost seems it would be better to be the provider of that expensive debt rather than a part owner of the company for the next little while.

Cheers

Gary

 

[snabbu]

Re: Banks

Here is a link to FN arena's article on Banks
http://www.fnarena.com/index4.cfm?type=dsp_newsitem&n=80BE54E7-1871-E587-E1A5BAC2940B739E

Cheers

Gary