Which Public Companies Are Making The Most From Higher Interest Rates

Profits fro Higher Interest Rates
Treasure Investment Team
March 6, 2023

Unquestionably, the biggest event in the financial market last year was the Fed’s sharp increase in interest rates. While some of the increase is to blame for the stock market decline in 2022, there is a silver lining for businesses and corporate America: More income from their idle cash! Currently in the corporate world treasury teams are relentlessly working to take advantage of this higher interest rate opportunity, and you might be surprised how big the impact is for some companies.

The biggest earners

Banks are some of the most direct beneficiaries of an interest rate increase. The business model of a bank is to gather cheap deposits -while trying to pay as little interest on them as possible and use the cash from those deposits to buy higher yielding assets. As the Fed interest rate increases so does the profit they generate from holding higher yielding assets. This is why banks love higher interest rates. It’s logical to have banks at the top of the list of highest interest income earners. Unsurprisingly, Citibank is the current leader in the field having made more than $25 Billion in interest income over the last quarter alone (thank you Jerome Powell)!

In USD Millions. Source: Bloomberg

It’s interesting to note that after the top 10 quite a few non-financial companies emerge that are able to generate a sizable amount of interest income. We’ve talked about Apple before, but other companies such as Intel, GM, Coca-Cola, and Pfizer were able to make  extra hundreds of millions just from their idle cash.

Which company’s revenue benefitted the most from higher rates?

Another way to slice the data is to look at the ratio between interest income and revenue. Essentially looking at how much interest income contributed to a company’s revenue. For some financial companies close to 100% of their revenue was due to the rise in interest rates, but also a substantial amount of non-financial companies received a boost to their revenue thanks to their interest income.

Source: Bloomberg

Which company’s profit was impacted the most by higher rates?

The final way to slice the data is to look at the contribution of interest income to a company’s profit. Here the numbers become even more staggering. The interest earned by Citibank was double their profit. All of Charles Shwab’s profit was essentially generated from their interest earnings. Even more impressive is the contribution to Airbnb, a non-financial company, where 45% of their profit was generated by their treasury team via the monetization of their idle cash.

Source: Bloomberg

Use your business idle cash to generate more revenue

As we have seen above, the current high interest rate is an opportunity seized by companies operating across many different sectors to generate substantially more revenue and profit. The treasury teams at those companies are the ones to be credited for these impressive numbers which were achieved by deploying active and systematic cash management across a diversified mix of conservative fixed income assets. In the current higher interest rate environment any business sitting on idle cash should seek to monetize this resource just like many large companies are actively doing.

Hint: you don’t need to have an internal treasury team to generate revenue on your idle cash, Treasure can help!

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