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Archive for January, 2015

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Posted On 20  Jan  2015  

Are banking shares a buy in 2015?

In a deflationary world loose money policy has to be largely transmitted through the banking system. In the developed world there is a concerted effort to reflate. Low and negative interest rates, flat yield curves impact bank profits for some forms of lending. But bank margins over their cost of funds need not be impacted to the same extent. The benefits of low interest rates and low energy prices cannot be understated for bank customers who borrow. Their ability to service debt is enhanced. Default rates go down and corporate and retail client defaults for banks are not as costly because in a world where asset prices have to rise, recovery rates should also be higher. But when investing, one has to look at value as a starting point and one has to measure, monitor and manage market risks. Please have a look at out short piece on banks. Click