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Big Banks: What to Expect Now

Big bank stocks: Unless we get shocking news in the next day or so, it's already clear what's going on.

The good news:

1) credit is better;

2) there's higher capital, higher reserves.

The bad news:

1) very little loan growth;

2) they do not know what financial regulatory reform or Basel III will require them to do;

3) rates are lower, so you have excess capital being invested at lower rates (net interest margins getting squeezed).

If you're a cynic, you can say that banks look like utilities: excess capital, no growth.

What does it mean for bank stocks? More M&A is one of the only ways to grow in this environment. If you are worried about a double dip, however, that dampens the likelihood of more M&A.

Pray for an economic expansion, higher rates and an expansion of loan demand.

Big Financials Now:

Bank of America

Citigroup

General Electric*

JPMorgan Chase

Berkshire Hathaway-A shares

* GE is the parent company of CNBC.

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