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<p>Banking sector net interest income and net interest margins via Deutsche Bank's David Bianco:</p><p><div class="KonaFilter image-container display-table"><div><div class="image"></div><p></p></div></div></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/nationwide-insurance-industry-loss-ratio-2015-2">Nationwide's Super Bowl commercial about dead children is about corporate profits ... in a way that we can all appreciate</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="9rbTk0czrPq8J40cVbMQn_BvP7NgiiIY" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

Banking sector net interest income and net interest margins

<br /> There has been news of the use of a new method to lend rate calculation, but apparently, this is going to squeeze banks' <keyword id="6548026" type="ORGANIZATION" weightage="100" keywordseo="net-interest-margin">net interest margin</keyword> (<keyword id="173910" type="ORGANIZATION" weightage="100" keywordseo="NIM">NIM</keyword>), depress interest income and hit their profits. This is expected to happen especially to banks with a high concentration of corporate loans.<br />
<br />
Analysts said that NIMs of banks could fall by as much as 10 to 30 basis points as they get adjusted to a new interest rate regime with public sector banks. They would be bearing the impact of the squeeze because they depend so much on corporate loans. The basis point in question is 0.01 percentage points.<br />
<br /> Banks will be using marginal cost of funds to price lending rates. <keyword id="30067" type="ORGANIZATION" weightage="100" keywordseo="RBI">RBI</keyword> Governor <keyword id="6358908" type="PERSON" weightage="100" keywordseo="Raghuram-Rajan">Raghuram Rajan</keyword> said that the central bank would be releasing final guidelines within weeks so that the transmission of RBI’s policy actions since January can be quick.<br />
<br />
The banks that have larger floating rate pools are supposed to be affected more by this change; Axis Bank, Yes Bank, ICICI Bank, SBI, Bank of Baroda and PNB are amongst the banks expected to be impacted. The impact will be more severe in the coming six months as banks with a big<br />
floating rate corporate book would be adjusting with the new system.<br />
<br />
"However some private sector banks like Kotak Mahindra, IndusInd and HDFC Bank which have a high concentration of fixed rate retail loans will be least impacted," Rajiv Mehta, analyst at India Infoline, told ET.<br />
<br />
To calculate interest rates, the so-called marginal costs of the funding method will be using incremental cost of funds. To state simply, banks will now have to use the changed deposit rates as a benchmark while calculating lending rates. Earlier, base rates were arrived at by calculating the weighted average cost of deposits.<br />
<br />
Since January, the benchmark repo rate has been reduced by 125 basis points by RBI. A report by Crisil on Tuesday stated 10 major banks have seen a drop in the average lending rate by only 58 basis points.<br />
<br />
By adjusting their lending rates to lower the deposit rates, banks are likely to lose about 15,000 crore in interest income, as per Daljeet Singh Kohli, director and head research at India Nivesh Securities. "Small public sector banks like Dena Bank, Corporation and Indian Overseas will be hit more because they will have to reduce their base rate in line with the cost of new deposits," Kohli told ET. <br />
<br />
<a href="http://anilnotes.com/wp-content/uploads//2011/04/5f5615d6be6a251e94c97f723c5afefb.jpg"><em>Image source</em></a><br />

New lending rate norm expected to hit SBI, Axis, PNB & likes

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Spencer Platt/Getty Images</span></p></div><p></p></div></div></p><ul><li><strong>Several of Wall Street's biggest banks reported second-quarter results this week that rattled investors and got them worried about the impact of lower interest rates.</strong></li><li><strong>In the weeks leading up to bank earnings, investors and analysts were worried about net interest margins, one of the most important metrics for a banks profitability. </strong></li><li><strong>Both <a href="https://markets.businessinsider.com/stocks/wfc-stock">Wells Fargo</a> and <a href="https://markets.businessinsider.com/stocks/c-stock">Citigroup</a> reported declining net interest margins, and Goldman Sachs lowered its yearly outlook for net interest income. </strong></li><li><strong>The Fed is expected to adjust borrowing costs in July, and as rates move lower, banks earn less money on their overnight deposits to other institutions. </strong></li><li><strong><a href="https://markets.businessinsider.com/">Visit the Markets Insider homepage for more stories</a>.</strong></li></ul><p>The <a href="https://www.businessinsider.com/category/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a>'s expected rate cut in July is already rippling through Wall Street. </p><p>All of the major US banks reported second quarter earnings this week, with several posting declines in net interest margins due to interest rates that have already fallen in anticipation for the Fed's action. Lower rates are bad for banks because they earn less interest income on overnight deposits to other lending institutions. </p><p>Investors are worried that net interest margins have already as the Fed prepares to start cutting rates in July. <a href="https://markets.businessinsider.com/news/stocks/federal-reserve-interest-rate-decision-jerome-powell-again-signals-cuts-2019-6-1028307084">During a speech in late June</a>, Fed chair Jerome Powell told the Council on Foreign Relations its better to adjust borrowing costs earlier rather later if there are signs of weakness in the economy. </p><p><a href="https://markets.businessinsider.com/news/stocks/stocks-jump-fed-clarida-williams-signal-rate-cuts-coming-2019-7-1028367178">New York Fed President John Williams and Richard Clarida</a>, the vice chair of the Fed, echoed similar sentiments this past week, adding that it's important to for central banks to act quickly and be proactive with rate cuts. </p><p><strong><em><a href="https://www.surveymonkey.com/r/BI-Young-Investor-Panel" target="_blank" rel="noopener">Markets Insider is looking for a panel of millennial investors. If you're active in the markets, CLICK HERE to sign up.</a></em></strong></p><p>Major banks across Wall Street are already feeling the squeeze, and that could continue if the Fed cuts again. </p><p>The following banks reported either a drop in net interest margins or lowered their guidance for the year: </p><ul><li><strong><a href="https://markets.businessinsider.com/stocks/c-stock">Citi</a>:</strong> Net interest margins fell 2.67% from 2.70% a year ago</li><li><strong><a href="https://markets.businessinsider.com/stocks/jpm-stock">JPMorgan</a>: </strong>Lowered net interest income outlook to $57.5 billion from more than $58 billion it predicted in the first quarter</li><li><strong><a href="https://markets.businessinsider.com/stocks/wfc-stock">Wells Fargo</a>: </strong>Net interest margins dropped to 2.82% from 2.93% last year </li></ul><p><a href="https://markets.businessinsider.com/news/stocks/citigroup-2q-earnings-results-beat-estimates-in-second-quarter-2019-7-1028352427">While Citi's net interest margins slipped</a>, net interest income still increased by 2% thanks to a boost from its lending business. <a href="https://markets.businessinsider.com/stocks/ms-stock">Morgan Stanley</a> doesn't report net interest margins, but Jonathan Pruzen, the bank's chief financial officer, said lower interest rates would hurt margins in wealth management, but the impact on equities and fixed income was hard to predict. </p><p>"The bigger question heading into earnings season was whether NIM outlooks would trigger material downwards revisions in EPS estimates," Saul Martinez, an analyst at UBS said in a research note on Wednesday. "<span>Thus far, they haven't led us to change EPS estimates much." </span></p><p>Wall Street also broadly saw a decline in equities and fixed income trading. Morgan Stanley said its equities trading revenue fell by 14%, or more than any other major bank. </p><p>Goldman Sachs, which isn't impacted as much by rate changes because it has fewer deposits on its books, <a href="https://markets.businessinsider.com/news/stocks/goldman-sachs-2q-earnings-results-beat-estimates-in-second-quarter-2019-7-1028356115">posted an increase fixed income trading, but a drop in equities</a>. The firm also posted investment and lending revenues of $2.53 billion, its highest level in eight years. </p><p><strong><em>Now read more markets coverage from Markets Insider and Business Insider:</em></strong></p><p><em><strong><a href="https://markets.businessinsider.com/news/stocks/netflix-earnings-2q-2019-wall-street-reaction-big-subscriber-miss-2019-7-1028365204?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">'An unprecedented miss': Here's what Wall Street is saying about Netflix's disappointing quarter</a></strong></em></p><div data-unit="Markets-Insider/Stocks/News" data-sizes="0x0:320x50960x0:" data-prebid="0x0:Stocks/News/320x50960x0:" data-targeting="{" region:Mobile="" Top="" data-eager="" data-refresh="viewable" data-refresh-secs="90" id="htlad-2"><a href="https://markets.businessinsider.com/news/stocks/trump-trade-war-impact-on-market-biggest-investor-fear-survey-2019-7-1028365625?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener"><em><strong>Barclays surveyed more than 400 investors about their biggest market fear - and a clear majority cited Trump's global trade war</strong></em></a></div><p><em><strong><a href="https://www.businessinsider.com/money-management-advice-tax-reduction-strategy-from-top-wealth-advisor-2019-7">America's biggest wealth manager for the ultrarich is known for his tailor-made portfolios. He revealed to us his magic formula - and how he saves clients millions on taxes.</a></strong></em></p>    <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/what-causes-hurricanes-irma-harvey-jose-sahara-africa-easterly-atlantic-2017-9">Most hurricanes that hit the US come from the same exact spot in the world</a></h3>        <div>                    </div>    </div>

Wall Street banks are already feeling huge pressure from a Fed rate cut that hasn't even happened yet

<p><div class="image-container float_right" style="width:400px"><div class="image"></div><p class="source">Justin Sullivan/Getty Images</p><p class="caption">A sign is posted in front of a <keyword id="88858" type="CITY" weightage="60" keywordseo="Wells-Fargo">Wells Fargo</keyword> Bank branch in Oakland, California.</p></div>Wells Fargo Q1 financial results are out.</p>
<p>Earnings came in at $0.92 per share, which was much stronger than the $0.89 expected.</p>
<p>However, the bank's net interest margin, which is the money it makes on deposits, was 3.48%.  Analysts were looking for 3.53%.</p>
<p>Banks have struggled to keep their net interest margins wide in this low interest rate environment.</p>
<p>“Wells Fargo delivered outstanding first quarter 2013 results for our shareholders,” said CEO John Stumpf. “Quarterly earnings and EPS increased at double-digit rates compared with first quarter 2012, while loans and deposits demonstrated continued growth in a challenging economic environment. In addition, expenses continued to decline as we improved efficiency across the franchise, and returns on assets and equity increased and remained among the highest in our industry."</p>

Wells Fargo's Margins Were A Bit Thin

<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>Scott Olson/Getty Images</span></p><p class="caption">JPMorgan CEO Jamie Dimon.</p></div><p></p></div></div>JPMorgan is scheduled to release third-quarter earnings a little before 7am Friday. <br /><br />Here's what analysts are expecting: </p><ul><li><strong>Revenue</strong>: $27.4 billion</li><li><strong>Expenses:</strong> $15.7 billion</li><li><strong>Adjusted net income</strong>: $7.67 billion</li><li><strong>Adjusted EPS:</strong> $2.26 a share. </li><li><strong>Net interest margin:</strong> 2.5%</li><li><strong>What to watch for:</strong><ul><li>The outlook for loan growth, with higher interest rates potentially crimping demand for some products like mortgages. </li><li>The final capital markets tally for the third quarter, and management's outlook for the end of the year, which will include the last few days' activity when stock markets tumbled. </li><li>Details on the bank's expansion into new markets and <a href="https://www.businessinsider.com/chase-sapphire-banking-premium-checking-account-2018-9">recent launch of consumer-banking products Sapphire Banking</a> (named after its successful credit card of the same name) <a href="https://markets.businessinsider.com/news/stocks/how-to-use-jpmorgan-you-invest-free-stock-trading-platform-app-robinhood-competitor-2018-9-1027552219">and You Invest, the stock-trading app with free commissions. </a></li><li>Net interest margins. While interest rates have been going up with the Fed's rate hikes, the yield curve has remained flat. That keeps a lid on any expansion in bank lending margins. </li></ul></li></ul>    <div class="margin-top">        <h3>NOW WATCH: <a href="https://www.businessinsider.com/apple-watch-tips-tricks-2018-9">11 Apple Watch tips and tricks</a></h3>        <div>                    </div>    </div>

Here comes JPMorgan earnings....

<ul><li><strong>Banks' lending profits fell the most since at least 1986 in the third quarter as the coronavirus slammed profit margins, the <keyword id="126536" type="ORGANIZATION" weightage="60" keywordseo="Federal-Deposit-Insurance-Corporation">Federal Deposit Insurance Corporation</keyword> said Tuesday.</strong></li><li><strong><keyword id="466771" type="PERSON" weightage="60" keywordseo="net-interest-income">Net interest income</keyword> fell by 7.2%, or $10 billion, to $129 billion from the year-ago period, according to the agency's <a href="https://www.fdic.gov/news/press-releases/2020/pr20131.html">report</a>.</strong></li><li><strong>Net interest margins fell to a record-low 2.68% over the three-month period. That's 0.68 points lower than in the third quarter of 2019.</strong></li><li><strong>The drop in <keyword id="10364447" type="UNKNOWN" weightage="60" keywordseo="lending-income">lending income</keyword> did little to dent overall profitability. Slashed loan-loss provisions helped net profits jump $32.4 billion to $51.2 billion in the third quarter, the <keyword id="115108" type="ORGANIZATION" weightage="60" keywordseo="FDIC">FDIC</keyword> said.</strong></li><li><strong><a href="https://www.businessinsider.com/?utm_source=markets&amp;utm_medium=ingest?utm_source=markets&amp;utm_medium=ingestutm_source=msn.com&amp;utm_medium=referral&amp;utm_content=msn-slideshow&amp;utm_campaign=bodyurl?utm_source=markets&amp;utm_medium=ingestts&amp;utm_medium=ingest">Visit the Business Insider homepage for more stories</a>.</strong></li></ul><p>Net interest income — profits made through banks' lending arms — fell the most on record through the third quarter as the coronavirus dragged on margins, the Federal Deposit Insurance Corporation said in a Tuesday <a href="https://www.fdic.gov/news/press-releases/2020/pr20131.html">report</a>.</p><p>Lending profits fell by 7.2%, or $10 billion, to $129 billion from the year-ago quarter, marking the fourth straight quarter of declines. Nearly half of all banks reported lower net interest income year-over-year, according to the FDIC.</p><p><keyword id="6357061" type="SPONSORED" weightage="60" keywordseo="earnings">Earnings</keyword> were pressured by the lowest net interest margins in the agency's 34-year history. The average net interest margin fell 0.68 points from the year-ago period to 2.68%.</p><p><em><strong>Read more:</strong> <a href="https://www.businessinsider.com/real-estate-investing-strategy-airbnb-shelby-osborne-shares-unique-strategy-2020-12">Shelby Osborne achieved financial freedom using a unique twist on a classic real-estate investment strategy. Here's how she built a portfolio of 53 units, starting in her early 20s.</a></em></p><p>The decline in lending income was still overshadowed by gains elsewhere. Banks' net profits climbed $32.4 billion to $51.2 billion in the third quarter, the FDIC said. The sum is still down $6.2 billion from the year-ago period but shows the industry bouncing back significantly from virus-induced lows. Earnings were largely boosted by a $47.5 billion decline in loan-loss provisions.</p><p>"Lower provisions reflect the improving economy and a general expectation from the banking industry of stabilization in the expected future credit performance of the loan portfolio," FDIC Chairman Jelena McWilliams said in a statement.</p><p>More than half of all banks reported higher income compared to the second quarter. Still, the share of unprofitable firms rose year-over-year to 4.7%.</p><p>The third quarter saw one new bank open and 33 banks absorbed through mergers. No banks failed through the period, the FDIC said.</p><p><em><strong>Now read more <keyword id="31671" type="CITY" weightage="100" keywordseo="markets">markets</keyword> coverage from Markets Insider and Business Insider:</strong></em></p><p><em><strong><a href="https://markets.businessinsider.com/news/stocks/blackberry-stock-price-record-rally-automotive-software-deal-amazon-bb-2020-12-1029854658">BlackBerry spikes record 65% after finalizing deal with Amazon for automotive data software</a></strong></em></p><p><em><strong><a href="https://markets.businessinsider.com/news/stocks/zoom-video-q3-earnings-stock-price-slowing-revenue-growth-guidance-2020-12-1029854162">Zoom slides 14% as slowing sales-growth forecasts make investors question the stock's 200% post-COVID rally</a></strong></em></p><p><em><strong><a href="https://www.businessinsider.com/stocks-to-buy-31-set-to-become-growth-engines-hsbc-2020-12">HSBC says buy these 31 global stocks that are exposed to the pandemic's biggest tech disruptions and set to become growth engines of the future</a></strong></em></p>

US banks weathered a record plunge in lending income as COVID-19 hit profits

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><p class="source"><span>Getty</span></p><p class="caption">Ross McEwan, Chief Executive of RBS (Royal Bank of Scotland) speaks to reporters and investors on February 27, 2014 in London, England.</p></div><p></p></div></div>Royal Bank of Scotland made a £2 billion pre-tax loss for <a href="http://www.investegate.co.uk/royal-bk-scot-grp---rbs-/rns/half-year-report---part-1/201608050700113368G/">the first half of 2016</a>, blaming the high cost of past mistakes.</p><p>The lender was weighed down by £1.3 billion of litigation and misconduct costs, including more payouts to customers who were wrongfully sold PPI insurance, as well as litigation over treatment of shareholders in 2008, when the bank was rescued.</p><p>The bank made a £1 billion loss in the second quarter alone, much bigger than the <a href="http://www.bloomberg.com/news/articles/2016-08-05/rbs-posts-second-quarter-loss-on-1-7-billion-litigation-expense">£247 million loss expected by 11 analysts surveyed by Bloomberg News.</a></p><p>RBS said that the Brexit vote in June will hurt its net interest margin - the profit made on lending to customers at a higher rate than the bank borrows - because it will force the central bank to keep rates lower for longer.</p><p><a href="http://uk.businessinsider.com/bank-of-england-mark-carney-interest-rate-decision-2016-8">The Bank of England on Thursday attempted to contain the economic fallout of Brexit by slashing rates in half to 0.25%,</a> potentially making it harder for RBS to make money on its portfolio of lending.</p><p>"It will squeeze us on the net interest margin, but will it help us lend more? No, because we've already been lending at a decent rate," Ewen Stevenson, RBS CFO, <a href="http://www.bloomberg.com/live/europe">told Bloomberg News in an interview.</a></p><p>RBS shares lost more than 97% of their value since prior to the financial crisis, and dropped by 30% following the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword>'s Brexit vote.</p><p>The bank noted that mortgage applications fell after the EU referendum in June.</p><p>Here's the chart from the results presentation:</p><p><div class="KonaFilter image-container display-table"><div><div class="image on-image"><p class="source"><span>RBS</span></p></div><p></p></div></div></p><p>RBS has been majority-owned by the British government since it was bailed out during the financial crisis, and the government has been gradually selling off small portions of the bank in the past two years.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/real-estate-bizarre-house-san-francisco-california-suburb-2016-7">No one wants to buy this bizarre house in a wealthy San Francisco suburb</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="hmdzcxNTE64DFq4MmhnQPHwo6CHUK3mS" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

RBS lost &#163;2 billion in the first half of this year and is still paying out on past mistakes

Mumbai, Jan 31 () Aditya Birla Capital, the holding company of the financial services verticals of the AV Birla Group, on Friday reported a 17 per cent growth in consolidated net income to Rs 250 crore for the December quarter.
<p> Its consolidated revenue rose 13 per cent to Rs 4,645 crore, the company said.
</p><p> It added that the overall lending book (NBFC and housing finance combined) stood at Rs 60,123 crore at the end of the quarter. The NBFC loan book rose to Rs 47,933 crore, led by a steep 30 per cent growth in the retail book. The bottomline was boosted by a 41-basis point expansion in the net interest margin to 5.24 per cent.
</p><p> The housing finance loan book grew 13 per cent to Rs 12,190 crore, maintaining a net interest margin to 3 per cent, the company said. 
</p><p> The cost-to-income ratio improved to 49 from 58 in the previous year, led by scale and operating efficiencies, helping post better bottomline.
</p><p> The affordable loan book has grown significantly with 1.8 times growth, helping its quarterly profit of the vertical clip at 31 per cent to Rs 27 crore.
</p><p> The insurance arms (life and health) saw gross premium grow 18 per cent to Rs 2,366 crore, led by a 14 per cent growth in individual first year premium, helping double the net value of new business to 10.4 per cent from 5.2 per cent.
</p><p> The health insurance business saw gross written premium jumping 73 per cent to Rs 547 crore. 
</p><p> The asset management company business reported an average assets under management (AAUM) of Rs 2,65,475 crore, of which domestic equity AAUM grew 6 per cent, contributing 37 per cent of the overall domestic AAUM.
</p> The vertical clocked a quarterly profit of Rs 130 crore, up 19 per cent.  BEN  HRS

Aditya Birla Capital net income rises 17 pc to Rs 250 cr

<ul><li><strong><keyword id="74326" type="PERSON" weightage="60" keywordseo="Bank-stocks">Bank stocks</keyword> rallied on Wednesday as investors hoped a Democratic congress will lead to more fiscal support that could aid the <keyword id="398791" type="PERSON" weightage="60" keywordseo="financials-sector">financials sector</keyword>. </strong></li><li><strong>Bank of America climbed 7.8%, Wells Fargo 8%,  JPMorgan 5.6%, and Citigroup 6.9%.</strong></li><li><strong>Wells Fargo banking analyst </strong><a href="https://www.cnbc.com/video/2021/01/06/why-banking-analyst-mike-mayo-says-its-a-new-day-for-banks.html"><strong>Mike Mayo told CNBC </strong></a><strong>the Georgia runoff elections were the final event in the "Bank Stock Trifecta" that will push the sector higher.</strong></li><li><strong>"The reflation trade is back on, that should help the bank net interest margins, and to the extent there's more spending, that can help mitigate the degree of credit losses," Mayo told CNBC on Wednesday.</strong></li><li><a href="https://www.businessinsider.com/?hprecirc-bullet?utm_source=markets&amp;utm_medium=ingestgest"><strong>Visit Business Insider's homepage for more stories</strong></a><strong style="color: #222222;">.</strong></li></ul><p>Bank stocks rallied on Wednesday as investors hoped more fiscal support from a Democratic congress will provide a boost to the beaten-down financial sector.</p><p>Shares of <a href="https://markets.businessinsider.com/stocks/bac-stock">Bank of America</a> gained as much as 7.8% to $32.62 a share, while <a href="https://markets.businessinsider.com/stocks/wfc-stock">Wells Fargo</a> gained as much as 8% to $33. <a href="https://markets.businessinsider.com/stocks/jpm-stock">JPMorgan</a>'s stock gained as much as 5.6%, and <a href="https://markets.businessinsider.com/stocks/c-stock">Citigroup</a> grew 6.9% to as high as $66 during intraday trading.  The Financial Select Sector SPDR Fund (<a href="https://markets.businessinsider.com/etfs/financial-select-sector-spdr-fund-us81369y6059">XLF</a>) leaped as much as 5.2%. </p><p>Wells Fargo banking analyst <a href="https://www.cnbc.com/video/2021/01/06/why-banking-analyst-mike-mayo-says-its-a-new-day-for-banks.html">Mike Mayo told CNBC </a>the Georgia runoff elections were the final event in the "Bank Stock Trifecta" that will continue to push the sector higher.<br /><br />"The reflation trade is back on, that should help the bank net interest margins, and to the extent there's more spending, that can help mitigate the degree of credit losses," Mayo told CNBC on Wednesday.</p><p><em><strong>Read more:</strong><a href="https://www.businessinsider.com/investing-advice-democratic-sweep-georgia-runoff-election-expert-portfolio-tips-2021-1">Wall Street experts are calling Georgia's runoff results 'the first surprise of 2021.' Here's how 4 of them recommend positioning your portfolio for what could happen next.</a></em></p><p>The first event was "Pfizer Monday," on Nov. 9, when Pfizer announced its vaccine was 90% effective in treating the coronavirus, Mayo said. The day propelled the bank sector and a number of other stocks that were hit hardest by the pandemic as investors began to see an economic recovery on the horizon. <br /><br />The analyst said that since Pfizer Monday, bank stocks have outperformed the market by the largest margin in over a decade. The second event was in December, when the Federal Reserve allowed banks to buy back their shares. Wells Fargo estimates banks can buy back about 15% of their shares over two years with their existing excess capital. <br /><br />In the last two months, bank stocks have soared. Citi is up the most, over 50% since Nov. 9 or Pfizer Monday.</p>

Bank stocks rally as investors hope more fiscal support from Democratic congress will aid financials

<p><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"></div><p></p></div></div><span>SHANGHAI/HONG KONG (Reuters) - Squeezed between cut-throat competition from online financing firms and rising funding costs, China's midsize banks are falling out of investors' favor as they increasingly lag behind the country's top five lenders.</span></p>
<p>While margins generated from lending have remained broadly stable at the larger banks, they have shrunk considerably for the second-tier lenders like China Everbright Bank &lt;601818.SS&gt; and China Merchants Bank &lt;600036.SS&gt; over the past six months, a Reuters data analysis shows.</p>
<p>And like some of their European peers, those smaller lenders are also lagging behind the big banks in terms of balance sheet strength, analysts say, a factor that is likely to be highlighted in the banking sector's third-quarter earnings.</p>
<p>China's five biggest banks are Industrial and Commercial Bank of China Ltd &lt;601398.SS&gt;&lt;1398.HK&gt; (ICBC), China Construction Bank Corp &lt;601939.SS&gt;&lt;0939.HK&gt; (CCB), Agricultural Bank of China Ltd &lt;1288.HK&gt;&lt;601288.SS&gt;, Bank of China (BoC) &lt;601988.SS&gt; &lt;3988.HK&gt; and Bank of Communications Co Ltd &lt;601328.SS&gt; &lt;3328.HK&gt;.</p>
<p>"The divergence between big and medium or small-sized banks will increase, as the latter see higher fundraising risks due to their weaker capital base," said Fan Cheuk Wan, chief investment officer Asia Pacific in Credit Suisse's private banking and wealth management unit.</p>
<p>CCB is due to kick off the banking sector's third-quarter earnings season on Thursday.</p>
<p>Second-tier lenders, also known as joint stock banks, have, on average, a market capitalization of less than 300 billion yuan, significantly smaller than the big five lenders.</p>
<p>Chinese banks' net interest margins (NI Ms), or the gap between what the lenders pay out for deposits and rake in from loans, have come under pressure from aggressive competition from online financing firms such as e-commerce group Alibaba's <baba.n> Yuebao platform.</baba.n></p>
<p><div class="KonaFilter image-container display-table"><div><div class="image on-image"></div><p></p></div></div>This is particularly a problem for smaller banks, which have to pay more to fund themselves as their regulatory capital ratio - a measure of balance sheet strength - is on average 1.5 percentage points weaker than that seen at the larger players.</p>
<p>"Net interest margins are likely to decline faster for smaller banks in China going forward, as they face rising costs of funding," said Vincent Chan, head of China research at Credit Suisse.</p>
<p>The average net interest margin for China's top five banks, has remained stable at around 2.6 percent over the last year.</p>
<p>In contrast, the next seven banks saw this key indicator of profitability drop to 1.86 percent in the second quarter from levels previously comparable to the big banks. The margins are seen falling further in the third-quarter.</p>
<p>To counter the profit squeeze, investors say second-tier lenders may look to innovate by embracing online finance.</p>
<p>"Online e-commerce is one area where the small- and mid-sized banks are a lot more flexible in partnering with a lot of the e-commerce retailers," said Tony Chu, who manages a portfolio for RS Investments, a fund with $24 billion of capital and positions in Chinese banks.</p>
<p>The big five banks also benefit from closer ties to the country's top state-owned companies, known as SOEs. Lending to these conglomerates is considered much safer because of implicit government guarantees.</p>
<p>"Large SOEs will emerge as winners and you want to be the bank that's lending to them, not the guys that are going to be driven out," said Matthew Smith, a banks analyst at Macquarie. Smith said he was positive about ICBC and CCB versus the smaller lenders since they count more large public companies among their clients.</p>
<p>(Editing by Lisa Jucca and Miral Fahmy)</p>

China's Midsize Banks Are Being Squeezed

New Delhi, Jan 25 () Private sector lender ICICI Bank on Saturday reported an over two-fold jump in standalone net profit at Rs 4,146.46 crore for the third quarter ended December 2019.
<p>It had registered a net profit of Rs 1,604.91 crore in the October-December period a year ago, ICICI Bank said in a BSE filing.
</p><p>Total income rose 17.23 per cent to Rs 23,638.26 crore during the quarter under review as compared to Rs 20,163.25 crore in the corresponding period a year ago.
</p><p>The bank's asset quality improved with gross non-performing assets (NPAs) falling to 5.95 per cent of gross loans at December-end 2019, compared to 7.75 per cent a year ago.
</p><p>"The net interest margin was 3.77 per cent in Q3, FY2020 compared to 3.64 per cent in the quarter ended September 30, 2018 (Q2, FY2020) and 3.40 per cent in Q3, FY2019," ICICI Bank said in a statement.
</p><p>Net NPAs stood at 1.49 per cent of total advances as against 2.58 per cent as on December 2018.
</p><p>"Provisions (excluding taxes) declined by 51 per cent year-on-year to Rs 2,083 crore in Q3 FY2020 from Rs 4,244 crore in Q3 FY2019," it said.  </p><p>
</p><p>In absolute term, gross bad loans of the lender stood at Rs 43 453.86 crore as on December 31, 2019 as compared to Rs 51 591.47 crore a year ago
</p><p>Net bad loans were valued at Rs 10,388.50 crore as against Rs 16,252.44 crore in the same quarter of the previous fiscal.
</p><p>On consolidated basis, the net profit was at Rs 4,670.10 crore during the quarter ended December 2019, against Rs 1,874.33 crore in the corresponding quarter a year earlier.
</p><p>Income, on consolidated basis, was at Rs 38,370.95 crore during the quarter ended December 2018-19 from Rs 33,433.31 crore in the year-ago period.
</p><p>Treasury income grew by 11 per cent year-on-year to Rs 531 crore in quarter under review from Rs 479 crore in the third quarter a year ago, it said.
</p><p> Net interest margin was 3.77 per cent in the third quarter.
</p>ICICI Bank said the recoveries, upgrades and other deletions, excluding write-offs were at Rs 4,088 crore in Q3, FY2020.  KRH  MKJ

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