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The new finance deal means a higher interest margin for Mouchel and requires it to make a "voluntary repayment" of £30m by May of next year, or face a 2% rise in its interest payments.
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The bank's stronger performance is due in part to a higher net interest margin, which is the difference between what banks pay to borrow money and what they charge to lend it.
This allows many of them to earn slightly higher net interest margins (the difference between the interest banks pay on deposits and earn on loans) than their big-city cousins.
But for those who say high net interest margins at Chinese banks gave them their past years of high earnings, a loosened regime might yield some surprises.
It's a matter of how banks price mortgage loans: a complicated mix of making loans that are attractive to potential investors -- often government-backed buyers like Fannie Mae and Freddie Mac -- protecting profit margins for higher interest rates to come, and balancing loan demand with available staff.
Like most banks, West Coast Bancorp has experienced compression in its net interest margin because of higher short-term interest rates.
Unlike public agencies, private investors must cover their own profit margins and the higher interest rates private entities pay to borrow the up-front cash.
According to one City source, Northern Rock must maintain the 10% margin or risk paying a higher interest rate to the bondholders.
Instead banks are using the rate rise to widen profit margins, with RBS projecting that higher interest rates will boost its income by £300m by 2020.
While margins at most banks have been squeezed by higher short-term interest rates, Nara reported an annualized net interest margin of 5.11% in the September quarter, up from 4.95% in the year-earlier period.
But if we assume the Shepherdson thesis is right, business faces two threats; higher interest costs and higher labour costs that eat into profit margins.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com