lorddarley

Rating the Top 12 U.S. Banks - From Hidden Gems to Zombies

This is a good article, but missing the big picture. Are banks good investments? I believe that most realize (finally) that all of the sizzle in their stocks was fluff from the non-banking businesses that were added after the repeal of Glass-Steagall.

Please, a reality check is in order for those who want to be bullish about banks. There is way too much banking capacity in the US. Our government is hell-bent to keep big bad ones afloat. The "good" banks will accordingly not get the profit they deserve, any more than the "good" homeowner, who paid bills on time, will profit from the Pelosi-Obama agenda.

It reminds me of the airline industry, which used federal bankruptcy laws to maintain constant pressure on margins of responsible carriers, with the result that none of them are good investments.

People forget that a bank was traditionaly a simple thing. It takes in deposits (liabilities) and makes loans (assets). Assuming that the loans are good, a bank is worth a little more than book. It's only when you add a little imagination, nonbanking products, and greed that you value a bank for more than that.

I would be sanguine about USB and other "good banks" in this article if I thought their less successful competitors were going out of business. However, they will be propped up by government, so they will continue to pressure margins of "good" banks.

Banks get money for almost nothing, and can lend it out at great margins. However, there just aren't enough good customers, and there are too many banks chasing them. Avoid the sector unless you are a short term trader angling for a bounce.

LordD