Banks~ You are all wrong, page-4

When interest rates begin to rise, banks "generally" stagnate. However, in this interest cycle, banks have risen, because they have been seen as stocks with defensive earnings.

When there is the perception or speculation that interest rates are on the up, the margins in the money market fall, compared to retail rates, therefore reducing the banks bottom line, since they can't pass on any speculative "expected" rate increase.

When interest rates are expected to fall, the opposite occurs and banks have an increased margin, between the cost of borrowing from the wholesale to the retail market. i.e. banks generally don't rush to pass on an interest drop within seconds of the announcement, but do when interest rate announcement rises.

If interest rates continue to rise for longer than expected, the stagnation in banks and probably most of the market will continue.

However, banks are involved in more operations than just core banking functions...eg funds mangement etc. So there is still strong revenue growing areas.