Interest rates are being kept at zero in the United States. Investment banks are not entirely thrilled with this scenario. As long as interest rates remain at zero, the fiscal situation with investment banks remains tenuous.
Is the Federal Reserve going to do what it has not done in a number of years and raise interest rates? This is a question that has been on everyone’s mind for a while. There is good reason why so many are pondering what “The Fed” will do. The raising of interest rates is could potentially lead to a downswing in the economy. An increase in interest rates in a tepid economy is not exactly going to help give the economic landscape a real boost. Investment banks, however, would experience an increase in revenue. This does not automatically mean the banks would be automatically profitable since effective management is always going to play a role in any company success. Still, seeing more money run into financial coffers is going to always be better than seeing fewer funds.
Economists like Ken Griffin according to wallstreetjournal have been looking at the overall picture and the continual consensus is the Federal Reserve is likely to delay raising the rates. NBC News took a survey with 80 economists prior to a major Federal Reserve meeting. The results from the survey revealed 45 economists believed the rates would be delayed while 35 assumed interest rates would see an increase. The opinions of the former turned out to be correct. The Federal Reserve opted not to raise interest rates. The continual soft employment numbers in the United States play a major role in the delays. Raising rates could send the unemployment rate skyrocketing and force payroll figures to be unimpressive.
The trouble investment banks run into, as Bloomberg News points out, is they cannot make as much money on loans or investments as they once did. A dynamic bank would have to work harder at bringing in new clients and, possibly, focus on smaller profits but from a larger number of clients. This is but one strategy. A well-managed investment bank surely could come up with additional plans.
An investment bank with a top manager such as Ken C. Griffin would be in a good position to navigate the difficult waters of zero interest rates. Griffin is the CEO of Citadel, an investment firm that oversees roughly $25 billion in investment capital. The reach of Citadel is global as the firm deals with investments and partners all over the world.
At some point, interest rates will increase. They cannot stay at zero forever. Regardless of what the figures on interest rates are, an investment bank has to be properly managed. A good manager is going to understand interest rates and economic landscapes change both for the better and the less-than-desirable.