The purpose of this article is to highlight S&P's recent study on the global banking industry's funding and liquidity risks. The link to the study is below, followed by summary thoughts on the sector and on the hunt for value in a space seemingly continuously under pressure from regulators and policians.
S&P Study Compares Funding And Liquidity Risks In Several Banking Systems Around The World. Info here: http://t.co/KtWFjhs7We
- Standard & Poor's (@standardpoors) July 18, 2013 )
This analysis (above) from S&P on the state of affairs with global bank funding risks is probably not a siren alarm for an imminent global financial crisis a la 2008. In particular, US banks are cited as having improved balance sheets and more stable funding sources. But peripheral countries in Europe and many emerging market countries deserve closer scrutiny over time.
Second quarter bank earnings in the US have so far been quite impressive on balance. In general, we've seen solid balance sheets, more cleansed risk asset portfolios, some interest spread income, but loan growth has been underwhelming. In addition, there remains a sword of Damocles over the sector thanks to constant calls for more and more regulation, great uncertainty over how Dodd-Frank will evolve, and ongoing demands for increased capital requirements.
From a performance perspective, the S&P Financial sector, which was scorched in the '08 crisis (first chart below), has been on the comeback for some time (second chart below):
I'm watching the sector closely, though remain quite lite overall. I'm looking at finding value plays within the sector, for example, Citigroup (NYSE:C), where leadership change within the institution has already proven more impactful on valuation than the overall industry headwinds.
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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
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Additional Disclaimer: currently long many stocks/ETFs, including Citigroup . Positions may change at any time without notice.
Disclosure: I am long C. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.