Float

RECENT NEWS
Reuters  Apr 10  Comment 
The British public spending watchdog will call up independent financial adviser Lazard this month regarding its role on the controversial Royal Mail flotation, a government spokeswoman said on Thursday.
The Australian  Apr 7  Comment 
US insurer Genworth Financial says it plans to float as much as 40pc of its Australian business as early as June.
The Economic Times  Apr 6  Comment 
Avendus Capital and former chief executive of business process outsourcing firm WNS, Neeraj Bhargava, are together launching a $500-million technology fund to back late stage ventures with plans for an
The Straits Times  Apr 2  Comment 
April 03, 2014 6:57 PM The public free float of delisting target Chemoil Energy has fallen to below the threshold that could lead to a trading suspension in the shares.     
Financial Times  Mar 31  Comment 
Of 16 ‘priority investors’, given larger allocations in the hope they would be stable, long-term shareholders, 12 sold all, or part, of stake quickly
WA Business News  Mar 27  Comment 
The Abbott government's sale of Medibank Private is likely to be a good opportunity for investors, but bad news for the health insurer's staff.
Times Online  Mar 24  Comment 
The University of Cambridge has emerged as a big financial winner from the flotation of Horizon Discovery, a genetics research...
Reuters  Mar 19  Comment 
Fidelity Investments did not improperly use money earned in overnight accounts while overseeing a retirement plan for a U.S.-based unit of Swiss manufacturer ABB Ltd., according to a U.S. appeals court decision released on Wednesday.     
Financial Times  Mar 17  Comment 
Scott Devitt was part of the team expected to cover the Chinese e-commerce giant’s flotation but has resigned to join a competitor
Wall Street Journal  Mar 17  Comment 
Online restaurant delivery company Just-Eat said it intends to raise up to $166 million in an initial public offering on the London Stock Exchange.




 
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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