Is Now the Time to Buy Bank Stocks?
With July now behind us, most of the major banks in the United States have reported second-quarter earnings. It was a mixed bag, as some banks outperformed and beat earnings estimates, while others underperformed and missed them.
But let's take a look at some of the trends that emerged from the second-quarter results and see what that tells us about the industry. Is now the time to buy bank stocks?
Banks make a significant portion of their revenue on the interest gained on loans, so the higher the interest rates, the more interest income a bank generates in net interest income (NII) -- assuming loan activity doesn't fall off a cliff. A good indicator to know is net interest margin (NIM), which measures how much a bank gets in interest on loans compared to how much it pays out in interest on deposits. When the NIM is higher, the bank is making a higher percentage of interest than it is paying out.
Source Fool.com
