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 2Q, 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 0.25% and Hong Kong’s Hang Seng 0.3%. Japan’s Nikkei is off today, but futures indicate a strong open.

ADX

9,439

-0.7% (YTD: -1.5%)

DFM

4,436

+0.3% (YTD: +9.3%)

Nasdaq Dubai UAE20

3,881

+0.2% (YTD: +1.0%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

4.5% o/n

4.1% 1 yr

TASI

12,130

+0.4% (YTD: +1.4%)

EGX30

31,038

+0.3% (YTD: +24.7%)

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 ADX fell 0.7% on Friday on turnover of AED 1.2 bn. The index is down 1.5% YTD.

In the green: Abu Dhabi National Company for Building Materials (+13.3%), Hayah Ins. Company (+9.6%) and Ooredoo (+7.2%).

In the red: Ghitha Holding (-10.0%), Apex Investment (-8.9%) and Aram Group (-4.5%).

Over on the DFM, the index rose 0.3% on turnover of AED 699.4 mn. Meanwhile Nasdaq Dubai closed up 0.2%.

CORPORATE ACTIONS-

Al Ansari Financial Services’ board of directors approved an interim dividend distribution of AED 157.5 mn, equivalent to 2.1 fils per share, according to a disclosure (pdf). The equity payout is set to be distributed on 16 October.

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