Third Fed Rate Cut Seen Reviving Bank Stock Prices, Deal Momentum

American Banker, November 19, 1998 | Go to article overview

Third Fed Rate Cut Seen Reviving Bank Stock Prices, Deal Momentum


By PADGETT, TANIA

Bank share prices have bounced back so sharply on the expectation that the Federal Reserve's rate cutting campaign will boost profit margins that some see another wave of consolidation shaping up.

After the Fed announced its third rate cut in two months Tuesday afternoon, investors snapped up bank stocks, driving them higher even as blue chip stocks fell.

In a report issued Wednesday, veteran bank analyst Thomas Hanley of Warburg Dillon Read declared Federal Reserve Chairman Alan Greenspan "man of the year" because his policymaking has created "an economic environment within which bank stocks have flourished."

Mr. Hanley said the Fed's focus on restoring the yield curve "should bode well for net interest revenue growth and, consequently, bank stocks."

Lower short term rates are seen as a boon because they enable banks to make money on long-term loans. Lower interest rates also prompt borrowing and add liquidity to a market that was atrophying because of the financial turmoil in the international markets.

Portfolio manager James Ellman at the GT Global Financial Services Fund said the series of rate cuts so far is sufficient to alleviate the credit crunch that many market watchers feared was coming.

"There still may be pockets or situations where banks are pulling in their horns to the riskier borrowers but creditworthy borrowers are able to secure borrowing now," said Mr. Ellman.

Mr. Ellman added that some banks will eventually be able to make money off the marginal borrower because as the competition for borrowers dries up, those few bankers will be able to charge high rates.

The higher bank stock prices that have resulted from the rosier expectations mean stronger currency for acquirers, who typically pay for deals with stock, Mr. Ellman added.

Still, though bank shares have rebounded, the S&P bank index remained 17% below its July peak at the close of trading Wednesday. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Third Fed Rate Cut Seen Reviving Bank Stock Prices, Deal Momentum
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.