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> That assumes the bank is paying a higher interest rate to depositors in the interim. Of course they are. I just looked at a Bank of America 10K [0], in whic
by amluto 4y ago
> That assumes the bank is paying a higher interest rate to depositors in the interim.
Of course they are. I just looked at a Bank of America 10K [0], in which they reported more interest-bearing deposits than non-interest-bearing deposits. They pay embarrassingly low average interest rates (of course), but those rates still go up as interest rates go up, and I also expect that more customers will demand interest when rates are higher.
I do expect that average deposit interest rates do not increase as much as market interest rates, so a high-interest environment is generally better for banks.
[0] https://investor.bankofamerica.com/regulatory-and-other-filings/all-sec-filings/content/0000070858-23-000092/0000070858-23-000092.pdf https://investor.bankofamerica.com/regulatory-and-other-fili... - see table 8
- Retric 4y agoYour investments could be paying 2% or 4% and it’s basically irrelevant when you can get away with paying 0.05% on deposits. Which is my point, for banks to get in trouble the actual interest paid needs to change before it matters and looking at Bank of America’s current rates they aren’t changing. https://media.bac-assets.com/DigitalDeposit_VA_VA_Northern.pdf?cacheBuster=8800 https://media.bac-assets.com/DigitalDeposit_VA_VA_Northern.p... This might in theory shift over time if people start swapping to higher interest rate accounts at different banks, but until then they are, pardon the pun, making bank. 6 months CD’s are typically a different story, but nope BoA is again paying well under 0.1% Aka crap. https://www.bankofamerica.com/deposits/bank-cds/standard-term-cd/ https://www.bankofamerica.com/deposits/bank-cds/standard-ter...
- amluto 4y agoAs banks spend longer paying almost no interest, more depositors will seek higher rates. Bank of America absolutely gets away with paying very little interest, but their average interest rate is surely increasing with increasing market interest rates.
- Retric 4y agoIn theory absolutely true, in practice it doesn’t seem to be the case. Which makes sense as BoA isn’t losing customers or capital starved.