Their margin loan as the broker is protected, while the equity owned by the investor is not.
If an individual plans both to own shares and to borrow, he will often get a lower rate of interest on a margin loan, because it is secured against shares.
Then his broker offered some advice: Cash in those options, but instead of selling some of the shares to cover the exercise price and related taxes, just take out a margin loan.
They soon focused on a much smaller bank, also well-run and having similar financial characteristics in such areas as return on equity, interest margin, loan quality, etc.
The evidence in support of its charges includes typed and handwritten notes from Lay promising not to use the loan for margin calls and going as far as to describe how he plans to use the money--presumably to support his lavish lifestyle.
It all started in February, when California-based New Century Financial cratered after rising subprime loan delinquencies and margin calls from its lenders, which refused to offer more credit.
As Microsoft shares tumbled in the tech crash, Lewis had to sell stock to meet Merrill's margin calls, demands for more loan collateral.
Finally, the unlikely sources of funds used to purchase the shares also suggest that Vance and Wellington were keen on avoiding raising red flags by perhaps making large purchases on margin or contacting a bank for a loan.
Net interest margin contraction will likely outweigh any positive from loan growth.
FORBES: Best Ideas 2013: Not All Financial Stocks Are Equal, Buy Bank Of America, Avoid Comerica
Some say they are slashing trading commissions and loan fees and trimming collateral requirements for margin loans made to buy more stocks, bonds, commodities and currencies.
In net interest margin (interest income minus interest cost, divided by the loan total), Lewis' bank scores 2.6%, versus 2.4% for Citi and 2.3% for Chase.
The bank's net interest margin--the difference between its cost of capital and average loan rate--has fallen for five consecutive quarters, to 0.9%.
Another scenario: The economy worsens, property owners miss debt payments, mortgage REITs are hit by defaults in their whole-loan portfolios, falling prices for junky commercial mortgage bonds and margin calls.
These burdens are occurring amid tepid loan growth and in a low interest rate environment that contributes to net interest margin contraction.
FORBES: Moody's Outlook On Banks? Still Negative, Here's Why
The bank's loan portfolio and margins grew during the fourth quarter, as did its net interest margin.
The market presently sniffs more early on profit margin leverage in coal mines, steel rolling mills and copper producers albeit many of these properties could easily violate loan covenants over the next 12 months.
应用推荐