Is it time to buy bank stocks in a rising interest rate environment?

OWhat banks do in the second half of this year and into 2023 will depend a lot on what the Fed does and how it reacts. In this Motley Fool live excerpt from “Ask Us Anything”, recorded on April 11Fool.com contributor Lou Whiteman explains why simply buying good companies and keeping them may be the best approach right now.

{% sfr %}

Lou Whiteman: Basically, banks are in the business of buying and selling money. It’s a very pure business and so the rates, the spread between what they borrow or your savings rate and what they lend, your lending rate is how they make their money. Almost universally, rates on the lending side go up first, so banks, in normal times, have a real chance in a rising interest rate environment. They rate loans first before or more aggressively than they come back by increasing your savings rates and they tend to make more money. I guess according to ProShopGuy, yes, we will see that in the coming quarters. Whether it’s sustainable or not and whether or not there’s advice, I tend to agree with Jamie, that there’s the greatest free get out of jail card of any company that will give advice this year between what the Fed is doing with Ukraine, with supply chains, with energy prices. Why bother giving advice? You have so many excuses not to, so I’m not going to use them for that.

But I mean it, again I tend to be the one who fears that inflation will last much longer than some say I’m not really in the Transtar camp but again to use this word again and again this morning what the business side of the banks will do in the second half of this year through 2023. Much will depend on what the Fed does and how it reacts. It’s really hard to say if this is sustainable, but the best banks know how to handle it. Buy good companies and keep them.

10 stocks we like better than Walmart
When our award-winning team of analysts have investment advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*

They have just revealed what they believe to be the ten best stocks for investors to buy now…and Walmart wasn’t one of them! That’s right – they think these 10 stocks are even better buys.

View all 10 stocks

Equity Advisor Returns 2/14/21

The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

About Mary Moser

Check Also

Stefon Diggs stars in Marvel commercial [WATCH]

Stefon Diggs stars in Marvel commercial [WATCH]

Buffalo Bills quarterback Josh Allen isn’t just an NFL player, he’s a celebrity. The four-year …