Post
by KateR » Thu Jan 20, 2022 10:42 pm
Crypto has been dropping due to several factors, the US interest rate being one, but inflation is hitting everywhere! However, it' clear that the funny internet scam money is fooling no one and the big banks is the place to store and protect your earnings and savings. Todays rally in part due to some clarity and messages from SEC that have provided a little support, but I expect it drop again until we are in Feb, but that's just me. Below will help confidence in the banks and how your interest increase will help, hopefully you locked in your loans and don't have variable rate loans, that would be painful.
I stopped buying crypto in Sept and began again in mid December, which has continued to yesterday, nothing today, as I continue to increase my holdings.
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Rising interest rates in the United States will funnel more money to banks. For savers and depositors, though, the benefits will come slowly, or not at all.
If the U.S. Federal Reserve delivers the three increases in interest rates that investors expect in 2022, lenders will generate more income from loans and securities on their books. JPMorgan expects net interest income from its banking business to swell by around 15% this year. Jamie Dimon’s firm and rival Wells Fargo both reckon rate-moves alone should increase interest income by 5%. Big banks have also stashed large amounts in excess deposits at the Fed and other central banks: Bank of America has nearly $320 billion on deposit. Those reserves will immediately earn extra income when official rates rise.
As the price of money goes up, so should the interest banks pay to customers. But the “deposit beta” – the percentage of a rate hike that makes it to depositors – varies from bank to bank. Daryl Bible, chief financial officer of $90 billion Truist Financial, said on Tuesday that he assumes a 25% beta, possibly rising to 50%. Bank of America passed on around 25% to depositors when rates last rose between 2015 and 2018. In general, it takes several hikes before customers get seriously discerning.
The mix of deposits also matters. Big companies are more likely to shop around for a better rate. Wells Fargo finance chief Mike Santomassimo pointed out on Friday that his bank’s weighting towards consumers and small-businesses leaves it better placed.
Banks can afford to be less responsive this time because they have more deposits than they need. Large lenders’ loan books are equivalent to around 50% of their deposits, according to Fed data. During the last rate-hike cycle that ratio was above 70%. After a prolonged period of very low rates, banks are competing more on their range of services, like buy-now-pay-later loans.
Salvation could come from new competitors. The number of deposit-like offerings grows every day, from Goldman Sachs’ Marcus, which is due to launch a checking account this year, to online lender SoFi Technologies, which received a U.S. banking charter on Tuesday. But there too, upstarts can win ground by offering better service, rather than better prices. The average depositor may have to watch the coming interest rate cycle from afar.