Originally posted by Christos12
Are you guys aware of what happens to banks when interest rates increase? Look at what happened to their shareprices as interest rates dropped and flip the chart upside down.
This is basic economics. The dividends are not going to be maintained, the rates on the bonds and other instruments increase and hence NIM decreases. Added to that the increase in loan arrears and the next 5 years are going to be painful. The banks are, basically, going to subsidise their lenders.
The market has, of course, priced most of this in but actual outcomes and how well the market has guessed the future could mean further capital losses in the future.
Dividends will be cut to maintain capital ratios.
I wish you all luck with your investment. This is a sector I am steering well clear of.
If you are playing at 10 year game, banks are a great choice in AUS.
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