In order to be a good investor, you first need to have idea of where the market might go. Then you do your homework or test the ideas, and if the idea comes forth you can act on it. One idea is eventually interest rates need to go up. They may have to but with the slowing of the Chinese economy which lead to higher commodity prices, perhaps even with more people working the economy has a long way to go before rates are raised. We do not know what the federal reserve will do, but it is worth asking what if rates went up – which stocks would likely benefit? One sector that should benefit is the banking group. In that vein, Charles Martin from Thomson Reuters looked at what banks could benefit.

He started with companies with market capitalization greater than $ 2 billion.

The banks made money on the difference between interest income (money they lend) to the money they pay to depositors – the term is called NIM or Net Interest Margin. Mr. Martin was looking for positive NIM.

He wanted a price earnings ratio of less than 20.

The law requires banks to have 6% of Tier 1 capital. Mr. Martin wanted a higher degree of safety or 12%.

The price to book ratio was to be less than 1.6, analysts concern anything less than 2 to be undervalued.

To measure how the company is managing their costs there is an Efficiency Ratio and Mr. Martin was looking for less than 60%. This is overhead costs divided by total revenues.

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