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| Date: Saturday 22nd 2008f November 2008 04:52:33 AM |
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Bank Stocks Take A Whack - 09/19/2005 |
| By: Hari Wibowo |
| This week brings another casualty from the banking sector. The Federal Reserve has been raising interest rate for over a year now and the tightening of net interest margin has caused some banks to temper down their earning expectation. Bank Stocks were covered briefly in here. |
| This week, Fifth Third Bancorp (FITB) reduce its earning estimate for the quarter due to the diminishing net interest margin. Here is the link to the news. Another Bank announcing the same problem is Commerce Bancorp Inc. (CBH). Click here to view the news. |
| As I have said several days ago, it is normal for bank stocks to reduce their earnings when interest rate rises. Traditional banks have trouble lending money if rates go up to 10% as opposed to when interest rate is at 2%. |
| Having said that, Bank stocks are at the bottom when interest rate peaks. Now, historically 3.50 % is relatively low. Furthermore, the rise of commodity prices such as oil, gold, silver, copper and others, suggests that inflation will get higher. We should wait until 4 to 4.5% interest rate before deciding whether rate has reached its peak. Some of the bank stocks that is worth to watch is: Citigroup Inc. (C; dividend: 3.90% ), Bank of America Corp (BAC; dividend: 4.60%), Washington Mutual Inc. (WM; dividend: 4.50%), US Bancorp (USB; dividend: 4.00%), Fifth Third Bancorp (FITB; dividend: 3.50%) and Flagstar Bancorp Inc. (FBC; dividend: 5.90%) |
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| Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Flagstar Bancorp Inc..(FBC) or other securities. |
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