Float

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Financial Times  Jan 22  Comment 
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guardian.co.uk  Jan 19  Comment 
Henderson to return venerable infrastructure firm to public market with first big IPO of 2015 expected to value company at up to £1bn John Laing, the 167-year-old infrastructure group, has announced plans to float on the stock market in the first...
The Australian  Jan 16  Comment 
THE life insurance industry could be heading for a radical consolidation, as Hollard Group launches plans to float its Australian business.
The Australian  Jan 16  Comment 
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The Australian  Jan 15  Comment 
HOLLARD Insurance is set to select investment banking advisers for a potential float of its Greenstone financial services arm, market sources say.
Mondo Visione  Jan 15  Comment 
Deutsche Börse AG has announced an unscheduled adjustment to the free float of VTG AG in SDAX. The company’s free float changed by more than 10 percentage points, which was caused by a share increase due to an acquisition of another company as...
Yahoo  Jan 14  Comment 
Deutsche Bank is considering splitting off its retail division and listing it on the stock exchange should German lawmakers approve measures forcing banks to isolate risky trading activities, a person ...
guardian.co.uk  Jan 12  Comment 
Equipment-hire company intends to use the £103m of primary proceeds to reduce its current borrowing and to fund future growth Tool and equipment-hire company HSS Hire plans to list on the London stock market next month, raising a little more...
Financial Times  Jan 12  Comment 
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Wall Street Journal  Jan 7  Comment 
The Italian car maker is revving its engine for an IPO, but a luxury valuation could stop investors in their tracks.




 
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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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