Tags: Ross | rates | bank | holding

Wilbur Ross: Rising Rates Help My Bank Investments

Thursday, 29 Aug 2013 12:03 PM

By Dan Weil

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Billionaire investor Wilbur Ross, chairman of WL Ross & Co., says the rise of interest rates over the past three months has helped the small banks in which he invests.

The 10-year Treasury yield stood at 2.78 percent midday Thursday, up from 1.66 percent May 2.

"It's very positive," he told 4-traders.com.

Editor’s Note:
Obama Donor Banned This Message (Shocking)

That's because interest rates for the banks' assets react more quickly to changes than rates for the banks' liabilities do.

"The variability of rate on the asset side is almost instantaneous with rate changes," Ross said. "The variability of rate on the deposit side is much slower, because its time deposits. So it takes 30, 60, 90 days to run off."

Already the banks he invests in are beginning to experience an increase in their net interest margins, Ross noted. That margin is the difference between what the bank earns in interest income and what it doles out in interest payments.

As for lending, the biggest bank in Ross' portfolio, BankUnited, is experiencing buoyant loan growth, he asserted.

"It's not because of total market demand. We have been hiring away teams of lenders from other institutions, and they have been bringing their business over."

So it's a matter of increasing market share, "rather than an overall market growth," Ross explained.

While Ross' bank holdings may be benefiting from higher rates, big banks with large bond portfolios are seeing those holdings drop in value as rates rise.

"The challenge for these larger banks is it's absolutely impossible to reposition your balance sheet on a dime," banking analyst Todd Hagerman of Sterne Agee & Leach, told The Wall Street Journal.

"It takes several quarters to reposition yourself for" a sharp rate increase, he stressed.

Editor’s Note: Obama Donor Banned This Message (Shocking)

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