As it stated in
When normal interest rates return, we believe this will add $3 billion to revenue and improve our operating margin to more than 40 percent.”
This spread reduction has reduced our net interest income by $2.5 billion, from $10 billion to $7.5 billion — or if you look at it per account, from $240 to $180.
His key examples are being skeptical of housing before the bust and also investing heavily in the bank’s consumer business even after interest rates fell post-2008 and the near-term profitability of the business shrank.
“Since we strongly believe this is a temporary phenomenon and we did not want to take more risk to increase our net interest margin (which we easily could have done), we continued to open new accounts.
The following explanation may be technical, but it’s a good example of a CEO watching a key financial metric turn against short-term profitability and resisting the urge to react.
as declared in
Why Warren Buffett Loves Fed Rate Hikes
collected by :John Locas