While all three may be reaping in the benefits of new refinancing activity volume, the low interest rates are taking their toll. Since the new loans are at low rates for long terms, loan portfolios are being generated that will produce much lower revenue than they would have with normalized interest rates. Investing returns have experienced continued pressure since interest rates dropped, putting increased pressure on revenue generation.
The past two weeks have seen a decline in refinancing activity since rates have increased marginally. While this may seem like a problem, many of the bank’s top managers have spoken out about the return to normalized interest rates. JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon said that though investors should expect a “scary time” as rates normalize, he is looking forward to higher interest rates, as should everyone else. Wells CFO Tim Sloan said that his bank is well positioned for a return of higher rates, though the expected slowdown in refinancings will hit the bank harder than its rivals.
While the transition period may seem like it will be scary (to use Dimon’s word), the return to higher interest rates will help the market and banks in the long run. And as a Foolish long-term investor, knowing that the end result will be positive can help you navigate any potential pullback that results from the Fed tapering its bond buybacks.
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Fool contributor Jessica Alling has no position in any stocks mentioned — you can contact her here. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase & Co (NYSE:JPM)., and Wells Fargo.
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