Analysis: Big banks' glory days feared to be gone for good
The summer of 2012 may be remembered as the time when regulation, scandals and a protracted slow-growth economy finally caught up with big American banks.Analysis: Big banks' glory days feared to be gone for good
Ever since the financial crisis, U.S. banks and their investors have held out hopes of a return to the good times, when lending profits steadily rose and commercial and investment banking flourished together. But analysts and investors are now questioning whether things have changed for good.
"My gut says all these megabanks are worth more separately than combined," said Bill Black, managing partner of Consector Capital, a hedge fund that focuses on bank trading. Smaller, more focused banks could attract investors, satisfy regulators and increase depressed stock prices, he said.
Seven of the 10 biggest U.S. banks beat analysts' average earnings expectations in the second quarter. But much of that came from cutting costs and dipping into money previously set aside to offset bad loans, rather than from growth in their main businesses, which is what investors want to see.
Revenue from lending, trading and advising corporate clients on mergers is still weak, and low interest rates continue to squeeze profits on loans and other investments. Banks and their already depressed stocks appear headed for a long, grim future.
Manufacturing in slump in US, UK, eurozone and China
Manufacturing in most of the world is in a slump, a raft of reports for July has suggested.
US manufacturing growth shrank for the second month in a row, said a survey by the Institute for Supply Management.
In the UK, the manufacturing sector shrank at its fastest rate for more than three years, while in the eurozone, factory output contracted at its fastest pace in three years.
And manufacturing activity in China had its slowest increase in eight months.
The ISM, a trade group of US purchasing managers, said on Wednesday that its index of manufacturing activity rose to 49.8, from 49.7 in June.
A reading below 50 indicates contraction. June was the first time in three years that US manufacturing contracted, the survey showed.
The US economy slowed in the second quarter, while the UK and most of the eurozone has been in recession.
China is also facing a slowdown in the facing of weakening global demand for its goods and rising inflation.
Europe and China woesIn the UK, the Markit/CIPS manufacturing purchasing managers' index fell to 45.4 last month, from a downwardly-revised 48.4 in June.
The survey also highlighted a big fall in export orders for manufacturers, which it said had fallen at the sharpest rate since February 2009.
The PMI compiled by Markit for the 17 nations that use the euro fell to 44 from 45.1 in June.Germany, Europe's industrial powerhouse, posted one of the lowest scores.And manufacturing activity in China, the world's second-largest economy, dropped to 50.1 from 50.2 in June, official data showed.
Manufacturing in worldwide slump