In recent months, bank stock prices have fallen more rapidly than the larger market indexes. Some are actually selling at prices that they touched upon in 2011. The reason is clear: Many investors fear that problems with energy and energy related loans will recreate the crisis of 2008.
But there is virtually no likelihood that problems in one commercial lending sector could return banks to the devastation suffered in 2008. Banks are sound and their stock prices are very appealing.
I recently did an analysis of the aggregate balance sheets of 18 of the nation's largest banks. These companies hold 69 percent of the industry's assets and, therefore, are a good representation of the banking sector's exposure to risk. What the study revealed is that, should there be another recession (I am not predicting one), banks have more risk in their consumer and commercial real estate portfolios than they do in their energy, and metals and mining portfolios.