|Bank||7th November 2016||3rd August 2017||% increase|
|JP Morgan Chase||$67.76||$93.11||+37%|
|Bank of America||$17.01||$24.59||+44%|
Once it became clear that a $1 trillion infrastructure spending splurge was going to be a key policy of the Trump administration plus the savage cutting of regulation, the banking sector was always going to select another gear in terms of share value and it duly did. Just looking at the table above US banks were first out of the traps full of expectation, despite the fact President Trump has managed to get a paltry amount of his legislation through. However the GOP is making a real fist of virtually repealing Glass Steagull, Dodd Frank and Volcker rules, which all but leaves the US banking sector where it was pre-2008. The world’s economy has been to ‘hell and a handcart’ for what? Shareholders will be thrilled, provided there is no replication of the 2008/9 banking crisis. Goldman has under-performed when trading and broking equities, bonds and interest rates. This business, always a decent ‘Arfur Daley’ has been sepulchral.
UK banks have been on the recovery trail for eight years and now require 10 times the capital to do the same business. BREXIT presents superficial problems, which may not manifest themselves as severely as many ‘REMAINERS’ would want us to believe. However consumer credit, inflation and inadequate wage inflation has seen the Bank of England’s MPC committee leave rates at 0.25%. There may be no change for 6 months with added concern over growth in the UK, which has necessitated the BOE in its inflation report, to lower growth targets for 2017 from 1.9% to 1.7% and from 1.7% to 1.5% in 2018. Barclays has the Qatar capital injection issues to resolve as well as Jes Staley’s whistle blowing problems. However this bank has finished its restructuring. Lloyds has almost finished with PPI penal payments – all but £17 billion has gone out of its coffers. HSBC is focusing on Asia and China where it does 75% of its business to the detriment of the US and maybe the UK, though a new retail banking head office in Birmingham looks positive with 1000 jobs created.
In Europe there have been copious rights issues or bail-out in Italy. Spanish banks are grateful for South America and the fact that Spain’s economy has improved a tad. I am uncomfortable about German banks. Regulation seems too soft with too many landesbanks. It feels like a US regional banking crisis in the making. Hope I am wrong. The two big Swiss titans really have had the problems. However Messrs Ermotti and Thiam seem to have done well focusing the respective future of these banks on wealth management.
Overall these amazing gains in share value must be down to some degree to expectation that global growth is rising and that interest rates will not remain in the doldrums for too much longer….or?