Bank of Montreal T.BMO

Gordon Pape says, "Do buy bank stocks"

[zack50]

 

 

As a rule, the stock market hates rising interest rates. But there is a notable exception – banks. Higher rates mean enhanced net interest margins (NIMs). This measurement compares the net interest income generated from credit products like loans and mortgages with the interest paid for savings accounts and GICs. The greater the NIM, the more profit a financial institution will generate from its lending activities. Low interest rates squeezed NIMs, but with rate rises pending the margins are about to improve.

There’s another factor at work. From March 2020 until late last year, financial institutions were ordered to suspend dividend increases and share buybacks by the Office of the Superintendent of Financial Institutions. That prohibition was lifted in early November, with a directive to the banks to be “prudent” with their increases. Most responded accordingly, with the one exception being Bank of Montreal which implemented a 25 per-cent increase.

[spacegimp]

given the extremely high property valuations wont even a small rise in interest rates drive down demand for loans ?  maybe an initial q1 surge with people trying to lock in lower rates but after that a drop in   loan demand ?

[zack50]

Obviously, loans are not the only way that banks make their money. When intereest rates are higher, banks make more money by taking advantage of the difference between the interest rate paid to its customers vs. the interest they earn by investing themseslves. For example, the bank might pay its customers a full percentage point less than it earns through investing their customers' money in