Banks will soon be 'pure utilities,' analyst says

The Wells Fargo scandal will lead to regulations that will turn big banks into "pure utilities," analyst Paul Miller said Thursday.

"It just opens up a can of worms, with all the regulators that come in now and regulate how products are sold inside the banks to the point that it's going to be very difficult," Miller told CNBC's "Squawk on the Street."

Guggenheim Bank Analyst Eric Wasserstrom agreed that the banking sector is suffering from concerns about legitimacy and the transparency of banking and sales practices.

"The macro picture still remains very mixed. I think the bigger issue for this particular quarter is that loan growth, which for Wells Fargo and most of the banks is really the critical driver of current and future earnings, has been pretty spotty," Wasserstrom told "Squawk on the Street."

Wells Fargo, JPMorgan and Citi report quarterly earnings before Friday's opening bell.

On Wednesday, John Stumpf announced his retirement from Wells Fargo as chairman and CEO a month after the bank agreed to settle with regulators for $185 million for opening about 2 million accounts for bank customers who had never asked for them.

Problems in big bank retailing do not necessarily mean chaos for the banking sector, said Miller.

"Wells has a big balance sheet, they have a big mortgage company, they have other parts of that company besides the retail side that [do] very well," the FBR Capital Markets analyst said.

"I think down the road it's going to be very difficult to rein a lot of this stuff in. That's why I think you've got to bring somebody from the outside to run that retail side."

Wasserstrom said he is watching one of the quarter's worst performers, Citi, ahead of Friday's earnings reports.

"I'm quite constructive on Citi," Wasserstrom said. "Part of the real benefit is, in fact, what's going on internationally, particularly among their consumer lending business in Mexico and a couple of other regions, which I think have the opportunity to provide top-line upside and positive operating leverage, which many other institutions will have difficulty generating," he said.

When asked about an expected Federal Reserve interest rate hike in December, Miller said it will likely not be enough to have sweeping effects.

"We need a lot of rate hikes, not just one or two," Miller contended. "You need four to eight rate hikes to really materially impact … net interest margins."

"I don't think we're there yet, I don't think the economy's there yet. What I would like to see is a GDP growth rate north of 5 percent, that's going to cure all the ills, and I just don't see that here yet," Miller said.