While bank profits rose 21% in Q2 ’12 compared to a year earlier, looks can be deceiving. Much of the increase is due to one-time releases from loan-loss reserves. Worse, net interest margins fell to 3.46% in Q2 from 3.52% in Q1. And margins will shrink further as yields on deposits can’t fall more, and old loans issued when rates were higher mature and are replaced by lower-yielding ones.
Tag Archives: Profit margins
Profit Squeeze
Amazon recently announced earnings. And, while revenues and profit margins always change, ’11 was clearly not a banner year for earning. In Q4 ’11 Amazon had revenue of $17.4 billion but net income of only $177 million, a margin of just 1%! For all of ’11 sales were $48.1 billion–half of 1% of all consumer spending–and net income was just $631 million, for a slightly better margin of 1.3%.