JPMorgan is Only Big Bank Meeting Basel III Requirements: DeutscheVW Staff
The U.S banking industry attracts banks form around the world, and arguably forms the basis of the Global banking Industry performance. After having taken a dive to the depth of the worst financial crises since the great depression, the last two years have shown glimpses of lost value, as recovery continues across all aspects of the industry.
Nonetheless, the industry provokes caution, as the current euro zone crises threaten to escalate to the rest of the world, as globalization exhibits its dark side.
However, the U.S banks are pretty aware, having largely been pointed out as major pioneers of the 2008/2009 financial crises that eventually trembled the global banking industry, leading to massive economic recessions across the globe.
In this report we assess how the U.S banks are fairing out, as well as the preparedness set aside to weather the storm in case of a global financial crises, as the case in Europe remains untamed.
We also assess the banks’ progress toward compliance with Basel III, as these were coined in to avoid a re-occurrence of the horrific status of the global financial markets witnessed three years ago.
In this report, we feature some statistics obtained from research conducted by German’s Deutsche Bank AG (NYSE:DB), on the U.S Banking Industry, and the future outlook.
Firstly, as covered in our reports on the earnings results, most of the banks registered good results, while a few still struggled. While there was great improvement in cost management, pressure on revenues outweighed the benefits garnered from managing expenses, in a majority of the banks.
Deutsche Bank AG (NYSE:DB) outlines that strong mortgages are expected to continue over the next few years, as well as continued improvement in credit as some of the main catalysts of a promising banking industry. However, the German-based bank also expects various challenges that are likely to provoke a different thought from investors; there is a macroeconomic challenge that is coupled with sluggish capital markets.
Among the banks featured, which include both large cap and mid cap banks from the U.S; research on Bank of America Corp (NYSE:BAC) shows that the company’s capital is building quickly, and it also boasts a good leverage on its expenses going forward. Citigroup Inc. (NYSE:C)’s performance is driven by investment in capital markets, as well as favorable Macroeconomic factors.
JPMorgan Chase & Co. (NYSE:JPM) is yet another large cap featured, and according to the report, the company has a less compelling risk/reward, and a likely overrated EPS. Additionally, capital deployment is likely to disappoint, while it also remains uncertain with the corridors of justice, as featured in most of our articles. Citi and BofA are Buy rated in the research report, while JPMorgan is rated Hold.
Another major bank included in the report is Wells Fargo & Company (NYSE:WFC), which is rated Buy, as its 2012 structures remain strong, as Wells Fargo & Company (NYSE:WFC) capitalizes on Mortgage and declining expenses, and decreased exposure to macroeconomic risk.
The banks also face the risk of debt crises spill offs from Europe, along with the more stringent Basel III rules that require them to maintain certain levels of capital, and as at the time of writing, very few if any, meet those standards. Therefore, in as much as the banks are promising good performances in 2012, much of this might not actually trickle down to shareholders, as a majority of it could be retained.
Among the large cap banks, the chart indicates that only JPMorgan Chase & Co. (NYSE:JPM) currently meets Basel III tier 1 capital rules. in total, from the sampled banks, nearly nine banks are struggling to meet Basel III, with only four comfortable with the rules. Similarly, in terms of future outlook, the price to earnings ratio adjusted for excess capital indicates that four banks would be comfortable, while the rest would struggle.