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Kenjin | When bank increase the interest rate, will the bank share price up or down? |
Any idea? Thank you, buddy!
Additional Details
My question is will the bank share rise? |
 |
 
B
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It depends: If you are talking about Interest rates such as fed fund rates or the interbank rates then the shares of the back will go down as interest rates rise. This is because it will be more expensive for banks to borrow money and lend money out, raising there costs and hindering future business. The shares will go down because of this.
If you are talking about an individual bank such as Wells Fargo, who just increased there dividend by .10 share,then the shares of that bank should go up. ( this is what happened) but it is no guarantee that it goes up in a very bad market. The bank could go gown, but because of a market sell-off. |
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Beau.Gus
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Individual banks have little real control over interest rates. The market price of a bank's shares depends more on how well the bank is managing its clients' money, and how much profit it makes...
I could be wrong (it has happened before!), but I very much doubt you will find any real correlation between any bank's stock price and the prevailing interest rates... |
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Millenium Man
 |
banks do not increase interest rates. they put margins or fees, well let's call them Prices on their various products. some banks are known for always having good deals on their products, and others charge a pretty penny if you wish to do business with them. right now (because of the state of the US economy) most banks are not selling too many products at all. the federal reserve (the private company) sets the interest rates, and whether they raise or lower interest rates, there are too many other factors to say if the share price is going to go up or down. pardon the digression, but a prophecy: all of these woe is me banks getting cash infusions from the govt (really from us, the people) will buy up much of our country when all of the smoke clears from the herd's arses. |
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thomas p
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Assuming your question to be if a bank makes a unilateral interest increase the stock price should fall unless the increased price for its money is accepted by a special segment of the borrowing community. |
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Mayank
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well the interest rates are one thing that is now mostly controled by market in india as mostly all the indian banks are changing rates following sbi bank. and as per the stock price of a bank you should check out the bussiness news on the weekly basis atleast and the annual and quarterly report is the best report. |
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Ranto
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This is basic stuff -- anyone who knows anything about debt knows that the value goes down if yields go up.
Wow -- it is amazing how many people will answer a question when they have no clue about it.
The assets of most banks are long term loans, while the liabilities are short term deposits. When interest rates rise, the value of the liabilities hardly changes, while the value of the assets goes down.
Therefore, the value of a bank should go down when interest rates rise.
The link below is to an academic paper that finds that this happens to bank share prices. |
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Barnaby J
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Nashuar gave you a good idea about how that banks work with the rates.
Now you have to apply that to the present market scenario.
Rates are going up for various reasons (combat inflation, etc) and it will reduce the amount of easy money out there. The banks will make more off of prime customers, but everyone else is essentially up the river without a paddle.
All of this is pointless if that the bank does not have enough capital to whether writedowns(bad loans) or a run on the bank (IndyMac). Right now many regional banks and Savings and loans are priced for failure. (Look at WB)
What I am saying is that interest rates going up will help the banks, but the bigger picture is that the market is giving away the banks right now. If they can survive the next year or two, the banks and financials are the investments of a lifetime.
Good luck! |
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what?
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well, for the fed to raise interest rates, financial stocks would have to be doing much much better. so they would probably rise (along with everything else) just because the market would take it as an indication that the worst is behind us. |
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ravitheja_29
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The change in share price of any scrip is combination of many factors like, growth prospective s, earnings, market sentiments, volumes , open interest future markets etc. Thus the interest rate increase alone can not bring changes in share price. However the same will have an impact on profits/earnings. This earnings are one of the factors and not only factors, affecting the change in share price. |
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Nahsuar
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Existing Interest rates are not driven by actions of commercial banks. The primary driver for these interest rates are the actions of the central bank, which controls monetary policy for the country. This means that they move interest rates up or down to keep inflation levels under check. These rate changes influence the rates charged by the bank.
The revenues for banks are, typically, not severely affected by rate changes because banks make money through many financial products - commercial loans being only one of them. Further, banks charge a premium on the Central Bank denominated rates (prime +). This allows them to generate revenue in any economic situation. |
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Dhaanish N
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Increase in bank interests are not controlled by banks but the central banks of the respective countries. It usually reflects in a lot of shares including banking shares. |
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srikaant
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There is no correlation among the interest rate and share price of the banks are concern. Teh price of the share is depnding upon the performance of the institution, the earning capactiy, etc. RBI is controlling the interest rate as a measure of controlling inflation. |
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Kate
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yes and no If a bank increases interest rates then it is earning more money then before on loans.
But there are a lot of other factors involved in share price and an increase in interest rates alone may not be enough to cause any sort of significant increase in share price. |
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sharuk
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i think it won't rise because the position of DR.MANMOHAN SINGH is going down.......................
so i think the market will go down in few weeks............................ |
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