Zacks Investment Research | Sep 13, 2019 08:02AM ET
During the last five trading sessions, performance of major bank stocks remained bullish on account of rise in yield on the 10-year Treasury notes. A rise in longer-term yields boosts bank profits, as widening spreads between long and short-term rates lead to improvement in net interest margin and support top-line growth.
While cut in interest rates by the Federal Reserve will hamper banks’ net interest income (NII) growth in the quarters ahead, rise in long-term yield cheered investors. The yield had been falling for quite some time and even had inverted during the past few months.
Notably, as factored in by the markets, major banks are expected to report disappointing trading/markets results for the third quarter. Also, decline in interest rates led many banks to lower NII guidance for 2019.
However, banks continue with their efforts to counter the challenging operating backdrop by diversifying revenues and upgrade technology to meet changing customer needs. The banks have been undertaking inorganic growth efforts and expanding in new regions to increase market share.
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