The average U.S.-based fund has diminished its stake to financial companies by almost 1.1 percentage points in the second quarter to approximately 14%, the largest single-quarter reduction since at least 2013, Reuters reported. Still, higher interest rates are an important factor for banks.
“Higher rates expand banks’ net interest margins, meaning they make more money on what they lend than what they pay in interest to borrow. A Fed hiking the fed funds rate again, as it’s expected to do on Wednesday, would typically help banks,” reports CNBC.
Large-cap banks remain attractive as they have been investing in online platforms and mobile apps, which make the companies more appealing to young millennials and less dependent on more costly physical branches.
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