FITB Fifth Third Bancorp

I hear a lot of money managers and strategists talk about value in big US banks. I still doubt it. I wouldn’t even buy the basket of financials in the form of the XLF yet.

 

For a long time, my favorite was Goldman Sachs (GS), the best trading bank ever to bank or trade. I could use them to outline where my doubts lie since their earnings momentum has definitely been to the downside lately. But I will just talk in general terms about sources of business revenue for lots of bulge bracket banks that could still be in trouble.

 

Investment banking: the revenues are not what they used to be and don’t appear to be coming back.

 

Proprietary trading: what regulation doesn’t take away, the shift is definitely away from risk-taking.

 

Real estate: exposure to housing for many means things can still get worse before they get better.

 

European exposure: when in doubt, assume financial contagion over there will impact banks negatively over here.

 

Corporate treasury/custody services: more and more, corporations learn to do things for themselves that banks used to do. I first saw the trend in FX ten years ago where corporations were gaining direct access to manage their own FX exposure through electronic dealing platforms with the same bid/ask spreads.

 

I am clearly no expert on banking and there are certainly pockets of strength in regionals with solid lending portfolios.

 

Let’s hear where you stand on financials in general, and different types of banks in particular. Do you see value in any big banks, or is the trend still down? What regional names do you like?

 

Cooker

 
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