Apple Inc., the Bank

Apple is now tapping the debt market, borrowing tens of billions of dollars, with very low yields to finance dividend payout and share repurchase.

Early chatter on the Apple (AAPL) debt offering has 3-year paper priced around 35 basis points over comparable-maturity Treasurys and 10-years priced 90-95 bps above (Microsoft priced at +70). The 3-year Treasury currently yields 0.31%. Borrowing at 0.66%, Apple can buy back shares yielding nearly 3% (with free cash flow yield far higher than that).

Capturing that yield differential and upside potential using borrowed funds with low funding costs is how banks make profits.

Additionally, with tens of millions of installed loyal users, Apple can do a lot more in electronic payments and financial services. Just like building out the retail stores, it's perhaps time for Apple to build a new kind of banking services in and out of the stores.