The Bank of Canada increased interest rates by a quarter point Wednesday for the first time in seven years. Higher interest rates benefit companies in the financial services sector, with most of the effects being realized by lenders. Higher rates typically means lenders will generate incremental revenues without incurring incremental costs, thus increasing their profitability. Strangely, lenders who have lower margins will reap greater benefits from those who have already high margins. In light of this, we have identified five Canadian small cap stocks that will likely see the greatest increases in profitability due to rising interest rates.
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