Float

RECENT NEWS
The Australian  6 hrs ago  Comment 
Bain Capital is preparing to launch the $2.8 billion initial public offering of its accounting software firm MYOB as early as Tuesday.
The Australian  Mar 29  Comment 
The Australian  Mar 24  Comment 
Mortgage lender Pepper Group has hired Goldman Sachs and Macquarie as joint lead managers for a potential float worth $1 billion.
The Hindu Business Line  Mar 23  Comment 
Will tap market for ₹3.60-lakh cr, or 60% of Budget target, in first half of 2015-16
Mondo Visione  Mar 16  Comment 
Deutsche Börse AG has announced an unscheduled adjustment to the free float of DMG MORI SEIKI AG O.N. in MDAX. The company’s free float has changed by more than 10 percentage points due to a takeover by DMG MORI GmbH. According to the rules...
BBC News  Feb 24  Comment 
UK bank Aldermore has revived its plans to float on the London Stock Exchange, with a listing planned next month.
Financial Times  Feb 24  Comment 
Challenger bank reviving IPO in bid to dodge election turbulence and overtake rival Shawbrook
Biomass Magazine  Feb 23  Comment 
Exciting biobased industry developments are occurring across the U.S. Although there are challenges, there are also opportunities at the state and local level. Minnesota is one state with many of the essential ingredients for a strong bioeconomy.
The Australian  Feb 23  Comment 
QBE Insurance says proceeds from a planned float of its mortgage insurance business are no longer needed, following a major capital overhaul.
The Australian  Feb 22  Comment 
ATLASSIAN co-founder Mike Cannon-Brookes says a public float would be little more than a “speed­ bump” for the development of the global software company.




 
TOP CONTRIBUTORS

The float refers to profits earned by a financial institution on assets that do not belong to that institution, but are held in custody for a client or other purpose. The float is an important source of profitability in a number of industries, such as:

  • Retail banking: In the case of retail banking, customers' checking accounts often earn little or no interest. However, the bank can collectively invest the money its customers have deposited in higher-yielding investments such as mortgages. The bank then earns the difference between the interest paid on the mortgage and the interest paid to customers with deposits in checking accounts.
  • Insurance: The float refers to the time period between when premiums are collected and claims paid out. During this time, insurers invest the premiums and generate returns. Legendary investor Warren Buffett of Berkshire Hathaway (BRK) was originally attracted to the insurance business since he could use low-cost float to earn higher returns on his successful investments.
  • Retail Brokerage: In recent years, stock brokerage firms (particularly E*TRADE Financial (ETFC)) have made money by investing cash left in client trading accounts and earning a float on these assets.

===Ways that financial institutions earn , interest rates rise when loans are longer-term, to compensate the lender for tying up money and making it inaccessible (this difference in interest rates is known as the Yield Curve. For example, a savings account that allows you to withdraw money at any time would pay a small interest rate, but a CD that leaves you unable to access your money for a period of months or years would pay a higher rate. While an individual bank customer might add or withdraw money unpredictably, the bank as a whole can generally count on having stable deposits across all its customers. This allows the bank to pay short-term interest on checking accounts, but then earn higher, long-term interest on these deposits by lending it out for long-term loans (such as mortgages, which typically last 30 years).

  • Assuming risk. By pursuing riskier investments, a financial institution can earn greater returns on assets on deposit.
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