I’ve been on (and on and on) about the extent to which windfall interest income on corporate cash piles likely helped offset, at the aggregate level anyway, the rising cost of debt.

The “aggregate level” bit is important. If you’re sitting on a mountain of cash, there’s a decent chance your cost of debt is quite low and vice versa. That’s the corporate “haves” versus “have-nots” phenomenon. The “haves” enjoy ready access to capital markets which were anyway wide open in 2020 and 2021 thanks to the Fed backstop. High grade borrowers locked in low rates and termed out their debt profiles. Between the proceeds from debt sales and bumper profits over the ensuing year or two, cash piles swelled and began to throw off considerable income as the Fed raised rates.

On the other side were the corporate “have-nots,” which typically enjoy less in the way of cash and are more vulnerable to higher borrowing costs by virtue of their relatively high reliance on loans and shorter-maturity funding.

So, whenever we suggest that corporations are actually benefiting from higher rates, it’s important to note that we’re speaking about corporates in aggregate. Not all corporations are created equal in that regard, just like not all households are reaping the benefits of the fat spread between juicy money market fund yields and record-low fixed mortgage rates from refis in 2020/2021.

With all of that in mind, have a look at the figure below. It comes from SocGen’s Andrew Lapthorne, who this week took a few minutes to reflect on “how 2023 turned out for US corporations.”

The chart header tells the story (as chart headers should). Yes, interest costs were more onerous. But between more in the way of interest income and a lighter tax burden, it was a wash at worst.

“Interest costs went up across the board by around 25% (c.$48 billion), but this was countered by interest payments received, which while smaller, still went up by 135% (c.$36 billion),” Lapthorne wrote. “That, coupled with a 10%+ drop in income taxes, meant that when combined, net interest + taxes fell during 2023, an incredibly surprising result when you consider the rise in rates. ”