A surge in one key short-term interest rate 10 years ago was a harbinger of a crisis that nearly broke the U.S. banking system. A similar jump this year will probably add billions to the industry’s bottom line.
The largest U.S. lenders could each make at least $1 billion in additional pretax profit in 2018 from a jump in the London interbank offered rate for dollars, based on data disclosed by the companies. That’s because customers who take out loans are forced to pay more as Libor rises while the banks’ own cost of credit has mostly held steady.
