US banks reaped around USD 1 tn windfall gains from the Fed’s prolonged high interest rate environment, according to the Financial Times ’ analysis of Federal Deposit Ins. Corporation data. While lenders benefited from higher yields on Fed deposits, they kept interest rates low for most savers, significantly boosting income margins. By the end of the second quarter of the year, the average US bank offered depositors just 2.2% interest — up from 0.2% two years earlier — yet still well below the Fed's 5.5% overnight rate which the banks themselves were getting. This disparity generated an estimated USD 1.1 tn in excess interest revenue, representing about half of total banking revenue during this period.

Banks are expected to see their margins narrow now that interest rates are falling, with some US banks already beginning to pass on the lower interest rates to depositors.

On the other side of the coin: Some USD 3 tn remains locked in certificates of deposits as borrowers sought to lock in the high interest rates. As these mature, analysts expect banks to slowly begin to adjust their offerings in response to market shifts.

REMEMBER- The US Federal Reserve cut interest rates by half a percentage point last week, marking the start of its first easing cycle since the pandemic.

MARKETS THIS MORNING-

Asian markets are still upbeat after last week’s interest rate decisions — which saw the central banks of China and Japan keep rates steady — with South Korea’s Kospi up 0.3% and Hong Kong’s Hang Seng 0.3%. Japan’s Nikkei is off today, but futures indicate a strong open.

EGX30

31,038

+0.3% (YTD: +24.7%)

USD (CBE)

Buy 48.51

Sell 48.65

USD (CIB)

Buy 48.50

Sell 48.60

Interest rates (CBE)

27.25% deposit

28.25% lending

Tadawul

12,130

+0.4% (YTD: +1.4%)

ADX

9,439

-0.7% (YTD: -1.5%)

DFM

4,436

+0.3% (YTD: +9.3%)

S&P 500

5,703

-0.2% (YTD: +19.6%)

FTSE 100

8,230

-1.2% (YTD: +6.4%)

Euro Stoxx 50

4,872

-1.5% (YTD: +7.7%)

Brent crude

USD 74.49

-0.5%

Natural gas (Nymex)

USD 2.43

+3.7%

Gold

USD 2,646.20

+1.2%

BTC

USD 63,290.30

+0.3% (YTD: +49.7%)

THE CLOSING BELL-

The EGX30 rose 0.3% at yesterday’s close on turnover of EGP 3.7 bn (5.7% below the 90-day average). Local investors were the sole net sellers. The index is up 24.7% YTD.

In the green: Egypt Kuwait Holding -EGP (+5.6%), Madinet Masr (+5.0%), and Emaar Misr (+4.5%).

In the red: Oriental Weavers (-1.6%), Abu Qir Fertilizers (-1.6%), and CIB (-1.5%).

CORPORATE ACTIONS-

Alexandria Mineral Oils Company (AMOC) will pay out a dividend of EGP 0.75 per share on its FY 2023-2024 earnings, the company said in EGX disclosure (pdf). The dividends will be paid out in two installments, with the first paid on 15 October and the second on 12 February.

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