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Published: 25th March 2017 by William Webster
You may have noticed that bank earnings are sensitive to interest rates. As rates fall the net interest income (NII) they earn falls too. Why is this?
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6th May 2020
For many banks and building societies Net Interest Income (NII) is a substantial part of “earnings”. Earnings allow us to add to capital, pay dividends and grow the business. Given its importance should NII be targeted by the Board?
Learn about the following: What forward interest rates are and how they are calculated . How forward rate agreements (FRAs) work. The terminology associated with FRAs. How FRAs settle. How FRAs are used for trading and hedging.
15th September 2009
Forward rate agreements (FRAs) are contracts for difference. They are traded in the over-the-counter (bilateral or non-exchange) market. They allow the two parties involved to hedge or speculate on interest rates in the future. Perhaps the easiest way to understand a FRA is to break it down into a loan and deposit. Let's try.
16th February 2020
The balance sheets of building societies often contain legacy assets. That’s business that you wish you hadn’t got. It can be on either side of the accounts and typically it’s base rate, Libor or lifetime linked. The customer may also have flexibility concerning drawdown and repayment, and this makes things worse. The net effect is to cut income whilst taking up management time – and it just keeps giving. Is there anything that top investors do that could help you?
11th September 2020
Selling mortgages with interest rates of between 1% and 4% may seem like an opportunity too good to miss, particularly now Bank rate is 0.10%, but is this too good to be true? Let’s see.