UBS Analyst: Nearing Permanent Solution to Banking Crisis

Proposals to set up a U.S. government-sponsored vehicle to take on toxic and illiquid assets from banks could be presented to Congress soon, and UBS analyst Philip Finch thinks this could bring us close to a permanent solution to the global banking crisis.

Mr. Finch told clients:

When previous banking crises are examined, government bailout proposals get favorable market reaction, which suggests we will be near an inflection point for a sustainable re-rating of global bank stocks.

Brokers and investment banks that trade on distressed multiples are expected to benefit most, although those with diversified income and funding sources are considered in the best position. These include JPMorgan Chase & Co. (JPM), HSBC Holdings Plc (HBC) and Credit Suisse Group AG (CS).

Mr. Finch noted that the two interlinked fundamental problems are the downward spiral in illiquid asset prices and the need for capital at financial institutions.