How is your bank performing?
American banks are underperforming. In other news, you’re reading a blog about payday loans and financial matters.
Felix Salmon reports for Reuters that veteran banking analyst Mike Mayo of Calyon Securities and CLSA Asia-Pacific Markets brokerage and investment group has given American banks the thumbs down by slapping them with an “underperform” rating. What this means is that the U.S. banking sector still has a ways to go before righting their ship. It also means that government aid may not help as much as was expected.
The seven deadly sins of banking
Unwise risk-taking has run rampant throughout the country’s banking establishment, largely because banks have consistently violated what Mayo calls “the seven deadly sins of banking.”
“The seven deadly sins of banking include greedy loan growth, gluttony of real estate, lust for high yields, sloth-like risk management, pride of low capital, envy of exotic fees, and anger of regulators,” he said.
Mayo was right to point out that the effect of all of this is instant gratification – front-load earnings – but the later cost to the economy is too high to warrant such present action. Since most analysts have been unable to sight an end to the storm yet, the sins of banks will continue to wreak havoc.
Sinful sinners sin
Who are the biggest sinners? It’s the big names, of course, with Mayo’s assessment and recommendation:
- Bank of America – underperforming!
- Citigroup Inc – underperforming!
- JPMorgan Chase – underperforming!
- Comerica Inc – underperforming!
- Wells Fargo & Co – underperforming!
- BB&T Corp – Sell! Sell! Sell!
- Fifth Third Bancorp – Sell! Sell! Sell!
- KeyCorp – Sell! Sell! Sell!
- SunTrust Banks Inc – Sell! Sell! Sell!
- U.S Bancorp – Sell! Sell! Sell!
Rolling recession
As John Spence reports for Marketwatch, Mayo’s less than rosy report brought stocks in the financial sector down
Mayo predicts that “loan losses to total loans should increase to levels that top the Great Depression. While certain mortgage problems are farther along, other areas are likely to accelerate, reflecting a rolling recession by asset class.”
Perhaps the time has come. In my opinion, it was long overdue. What am I talking about? Treasury Secretary Tim Geithner has warned that “executives at banks that require ‘exceptional’ help from the government could be removed.”
Don’t let the door hit you in the assets on the way out!
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I think they probably don’t like this guy because he said what they really don’t like hearing. Of course they are underperforming – doesn’t that kind of go right along with a recession?
People hate him because he is playing games with everyone elses money. There is absolutely no way this guy would have any clue as to what “bad loans” any bank would have, unless he actually worked there and was in management at that bank.
Its just the typical idiot doom and gloom wannabe analyst trying to drive the stock prices down to cover his short position.
The results of the bad banking industry is in and we all need to be more finiancially responsible to survive the long haul. Just remember you cant take your money with you when you die.