Is the shadow of higher interest rates still hanging over the bank stocks?
The shadow will always be hanging over banks. Interest rates are important in determining a bank’s profitability in more than one way. For example, what we have seen over the last few quarters is increasing short-term interest rates without a corresponding increase of long-term interest rates. That flattening of the yield curve is primarily detrimental to the profitability of smaller banks. That is the main reason we are neutral on small- and medium-capitalization banks, and we are more positive on large-market-capitalization banks. Spread revenue is a relatively small portion of their total revenue. But, as I said, this is only one of the ways that interest rates affect banks. Q: JPMorgan Chase (JPM ) was down again today — should we buy more or sell? A: It was down today, but it was up yesterday. I don’t think we should make our investment decisions looking at very short-term trends. As you may know, we have a buy recommendation on the shares. The company has been going through a ve
