Whenever a bank reports a huge profit, I wonder where the profit comes from.
Is it due to the huge interest rate spread, i.e. the difference between the high interest rate charged to borrowers and the meagre interest rate paid to depositors? Should the government have created a better investing environment so that the consumers get a decent interest rate on their savings?
How much of the profit come from the sale of financial products, including the high risk currency-linked, credit-linked and equity-linked products that have devastated the savings of the unwary investors?
Singapore has been an excellent place for the local and international banks to make huge profits. Does this suggest that the consumers in Singapore are contributing to these huge profits?
http://www.todayonline.com/Business/EDC120301-0000081/Singapore-helps-StanChart-hit-record-profit
Is it due to the huge interest rate spread, i.e. the difference between the high interest rate charged to borrowers and the meagre interest rate paid to depositors? Should the government have created a better investing environment so that the consumers get a decent interest rate on their savings?
How much of the profit come from the sale of financial products, including the high risk currency-linked, credit-linked and equity-linked products that have devastated the savings of the unwary investors?
Singapore has been an excellent place for the local and international banks to make huge profits. Does this suggest that the consumers in Singapore are contributing to these huge profits?
http://www.todayonline.com/Business/EDC120301-0000081/Singapore-helps-StanChart-hit-record-profit
Looking back, before Lehman Bros' bankruptcy, many American banks like Citibank, also reported huge profits and the subsequent huge bonuses paid to their high level staff.
ReplyDeleteBut these huge profits only reflect the earnings on interests earned or on the sale of bank products or services, or on derivative tradings, but no reports made on the kind of loans given, whether these would become non-performing loans in the near future, no outsiders or ordinary investors have any inkling.
After these American Banks reported eye-poppingly huge profits, the Lehman news hit the financial industry and shocked the whole world.
Now Chartered has also reported huge profits, but are they also involved in the Euro bonds nightmare, and if so, to what extent.
When a bank, whether local or foreign, reports huge profits, this is the time to be cautious.
And at this moment, this includes Chartered and DBS Bank. Whatever huge profits they reported, we have to take it with a pinch of salt.
Maybe Temasek holdings know a thing or two, not long ago, this SWF is selling bonds and redemption is the offer of Chartered shares, instead of cash.
If I read it correctly, before the last crisis, there were transactions in Singapore which were not under MAS's supervision. The total amount of transaction is about 9 trillions which is about 18 times of Singapore's GDP. MAS probably is keeping an eye on these transactions now. My guess is banks in Singapore make a lot of profit from these transactions.
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