NEW YORK (Reuters) - U.S. banks, after spending much of the last year
bracing themselves for higher bond yields, are now resigning themselves
to at least another few quarters of low rates, executives and analysts
said.
Banks including Wells Fargo & Co and PNC Financial Services Group are contemplating steps like investing their extra cash at current low yields or using derivatives that pay off if rates stay low.
"We are seeing more management teams acknowledging the prospect and reality that we remain in a lower for longer [interest-rate] environment," said Christopher Lee, a portfolio manager who specializes in financial companies at Fidelity Investments, which has $1.15 trillion invested in stocks across the world, in an e-mail.
Lee added in a telephone interview that "over time, you've got to throw the towel in" if the benefits of rising rates keep failing to materialize.
Positioning for higher rates has cost the 20 largest U.S. banks somewhere between $2.5 billion and $3 billion of income each quarter, roughly 6 percent of their collective profits before taxes, said Marty Mosby, a bank analyst at Vining Sparks.
Those estimated costs come from banks refraining from investing customer deposits in longer-term bonds, and holding the funds instead in cash or short-term investments, which offer much lower returns.
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Banks including Wells Fargo & Co and PNC Financial Services Group are contemplating steps like investing their extra cash at current low yields or using derivatives that pay off if rates stay low.
"We are seeing more management teams acknowledging the prospect and reality that we remain in a lower for longer [interest-rate] environment," said Christopher Lee, a portfolio manager who specializes in financial companies at Fidelity Investments, which has $1.15 trillion invested in stocks across the world, in an e-mail.
Lee added in a telephone interview that "over time, you've got to throw the towel in" if the benefits of rising rates keep failing to materialize.
Positioning for higher rates has cost the 20 largest U.S. banks somewhere between $2.5 billion and $3 billion of income each quarter, roughly 6 percent of their collective profits before taxes, said Marty Mosby, a bank analyst at Vining Sparks.
Those estimated costs come from banks refraining from investing customer deposits in longer-term bonds, and holding the funds instead in cash or short-term investments, which offer much lower returns.
read more Click here / www.trade4x.net
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