Banks are cyclical stocks that perform well when the economy is strong and less well when the economy is in recession. These days, the global macroeconomic environment is complex for banks.
Interest rates are up
Banks make a significant portion of their revenue on the interest gained on loans and from no interest on demand deposits, so usually, the higher the interest rates, the more interest income a bank generates.
Impact of a recession
While the net interest income trend is positive, the other side is a recession which might impact banks’ activity and profitability due to low credit activity and higher doubtful debts rate.
Many investors ask themselves which of the two trends will impact banks’ performance more.
Aurora analyzes the banking sector and 369 bank stocks in 40 markets.
Bank Stocks – Analysis for 13.1.23
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