Quick links: Breaking Election Invest Bitcoin Syria North Korea Hot clicks Scandal Topless
www.paywallnews.com Only News Behind Paywalls
Martket Watch / Biz - Money

Which bank stocks will fare best as deposit rates rise?

After years of ultra-low rates, banks may have to increase how much they pay savers. What does that mean for investors?


Savings accounts, which have paid out almost nothing for the past decade, could get more interesting in 2018 as yields rise and investors scramble for the higher returns. That could be bad news for certain banks.

Savings account yields haven’t risen much since the Federal Reserve started raising interest rates. As the Fed keeps tightening in 2018, more banks will raise deposit rates and savers will respond by rushing to the banks that pay the most.

That is what happened in the last tightening cycle in the mid-2000s—banks moved slowly at first, gradually accelerating as rates moved higher. This time banks might have to be more aggressive because it is easier than ever for savers to move cash electronically to higher yielding competitors like Capital One and American Express.

Analysts at Keefe, Bruyette and Woods estimate that banks will pass along 34% of the rise in the Fed’s target rate to savers in 2018, up from 15% in 2017. As a result, most banks will still be net beneficiaries of higher rates. But the impact will be uneven.

An expanded version of this report appears at WSJ.com

Popular on WSJ.com

Even If Your New Job Is a Bad Fit, Don’t Quit

Peter Thiel’s Founders Fund Makes Monster Bet on Bitcoin

ADS