Strategic Management: A Competitive Advantage Approach, Concepts and Cases, 16/e

Future

Banks, including Citigroup, are largely dependent on the spread between short- and long-term interest rates, referred to as the yield curve. When short-term rates are low, and long-term rates are high, bank profits tend to be higher, as they are able to pay relatively low interest rates on CDs and savings, while charging higher rates on automobile, housing, business and other loans. This spread is where the banks make money. In 2015, interest rates have been rising slowly in the United States.

Automobile sales were up in both 2014 and 2015 as customers are buying new and larger vehicles as the price of oil has dropped. This is a potential windfall for banks but only to the extent that rates start to increase. With the European Central ...