Will Rising Rates Buoy Bank Stocks?
Some will benefit more than others from higher interest rates, but for the most part, those future gains are already priced into their shares.
Erin Davis: A lot of investors ask us whether now is the right time to buy bank stocks, with interest rates likely to rise in 2015. We think the answer is more complicated than it may first appear.
First, it's important to know that interest rates themselves don't drive bank earnings. What we look at is net interest margins. Net interest margins are the difference between the interest income that banks earn on their assets and the expense they pay to fund their liabilities. This tends to be much more stable over time than interest rates themselves.
Erin Davis does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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