Rising interest rates are likely to provide a tailwind for the entire banking industry, but there are some financial institutions that look to be in especially strong positions to benefit. In this Fool Live video clip, recorded on Jan. 20, Fool.com contributor Jason Hall discusses why Axos Financial (AX 0.25%) is toward the top of his radar right now.
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Jason Hall: I do want to take a quick bank I'm looking forward to hearing from for just a minute. So Axos financial reports probably a month or so from now it'll probably it will report sometime in February. BofI Holding, right so Bank of the Internet, this is a familiar name for people that have been around for a while. It's now called Axos Financial, and it has just changed Matt so much. I want to share a couple of charts.
You go back a decade ago and this was basically like a jumbo lender. That was what they did. Southern California mortgages, jumbo loans and their book of business changed so much. Now that jumbo mortgage business, they have a $12 billion loan book, less than $4 billion of that were single-family mortgages. It's just amazing how much they've shifted their mix across commercial lending, commercial real estate, non-commercial lending. It's just incredible what they've done, their auto business.
The other thing I think is really interesting is they've changed their deposit mix enormously. You go back to 2013, more than half of it was CDs. This is rate shoppers. This is like the worst positioned to be a bank in when interest rates are going up because you have to pay them more to keep them, or you lose them.
You see how much that has shifted from 2013 to now, it's also more than 5X increase and the size of their deposit base and they have just gutted how much of that is tied to CDs. Checking, commercial lending, or commercial banking business accounts have grown substantially. That means that in a rising rate environment, their interest expenses should not go up as much as it would have in a prior existence.
So, Greg Garrabrants deserves a lot of credit for that. I didn't even talk about all the other non-lending business lines they've added over the past decade too. I'm really interested to find out where things are with Axos.