Maybe the market’s perception that bank stocks are out of the woods is premature. Many of the stocks in the sector have more than doubled from their early March lows.
According to CNBC, “Michael Mayo, a former Deutsche Bank analyst who now works for CLSA’s Calyon Securities, launched coverage of the banking sector saying that many of the recent fixes in the financial sector are merely `window dressing’ and problems still persist.”
The banks on the list include Citigroup (C) and JP Morgan (JPM).
Investors will know soon enough whether the prevailing sentiment about banks which has driven them higher recently or a vocal minority including Mayo is right. Bank earnings will be released over the next several weeks. Traders should be especially concerned about the two weakest US banks, Citigroup and Bank of America (BAC). If they post large losses, it will be a long year.
Douglas A. McIntyre