Who woulda thunk it, interest rate rises are good for banks!?
๐ Background: NAB is one of Australia's big four banks, but they've been on the naughty list lately. NAB was in court last year over alleged excessive staff workloads, and they've had anti-money laundering law... issues. Eek!
๐ What happened: It's finally good news for NAB. The bank earned $3.48 billion for the six months to March 31, an impressive 4.1% increase on the prior period.
๐ What else: NAB's lucky shareholders will get an interim dividend of 73 cents per share, up from 60 cents ๐ค the prior period. Thanks to rising interest rates, this could be just the start of more profitable times for NAB.
๐ก When it comes to rising interest rates, there are losers... and then there are winners. Homeowners with variable loans are usually considered the losers... and banks are considered the gigantic winners.
๐กBanks lend out money to customers via loans or credit cards. But the money they loan comes from regular people who deposit money in the bank. In other words, it gets money from depositors and gives it to borrowers.
๐ก Because the bank has increased the lending rate (i.e. how much it costs to loan money), but hasn't increased the money it gives to depositors by the same amount, they're making more money on each dollar. So, things tend to weigh heavily in their favour when we interest rates rise.
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