Wall Street stands to make billions when Janet Yellen starts hiking rates
Thomson Reuters
When the Federal Reserve increases interest rates (which its expected to do starting this week), lending businesses will reap the benefits.
"This is a tiny, tiny, tiny increase in interest rates that will help banks immeasurably," Richard Bove, a bank analyst at Rafferty Capital Markets, told Business Insider.
The biggest firms have already laid out the additional revenue they stand to make once rates start to rise.
JPMorgan says a one percent increase in interest rates will add $3 billion to "interest income" - or money earned from making loans - over a 12-month period; Citigroup stands to make about $2 billion in revenue and Bank of America says it could pick up about $4.5 billion in additional revenue.
It'll be a while before the Fed's increases get to a full one percent. It's likely to raise rates in quarter-point increments, and that with a great deal of hesitation. Most Wall Street executives expect between three and four rate hikes, with the central bank likely taking a break within the next 12 months.
Still, once it starts to add up, that's a healthy bump to a big source of revenue. At Bank of America, interest income from loans and leases in the first nine months of the year was about $24 billion.
While rising rates are going to cause some turbulence in other parts of the business, like investing and dealmaking, bankers think they can count on a little extra revenue to pad balance sheets.
- I spent $2,000 for 7 nights in a 179-square-foot room on one of the world's largest cruise ships. Take a look inside my cabin.
- One of the world's only 5-star airlines seems to be considering asking business-class passengers to bring their own cutlery
- Vodafone Idea FPO allotment – How to check allotment, GMP and more
- India leads in GenAI adoption, investment trends likely to rise in coming years: Report
- Reliance Jio emerges as World's largest mobile operator in data traffic, surpassing China mobile
- Satellite monitoring shows large expansion in 27% identified glacial lakes in Himalayas: ISRO
- Vodafone Idea shares jump nearly 8%
- Indians can now get multiple entry Schengen visa with longer validity as EU eases norms