Market Experts Tip Recovery for U.S. Banking Sector in 2012
Analysts are upbeat that the local banking sector would rebound this year, coming from the declines posted in 2011 that economists mostly attributed to overall slides in the shares market.
According to the latest assessment report issued by the New York-based RBC Dominion Securities, the financial institution suffered the most last year when share values shrunk and significantly decimated the worth of at least 10 industry groups listed in the S&P 500.
Giant banks such as JP Morgan Chase & Co. and Bank of America Corp. posted retreating shares of 21.6 percent and 58 percent last year, the RBC report said, highlighting the fact that American banks absorbed much the gloomy sentiments that pervaded the past year.
“There is no arguing the fact that banks significantly underperformed the general market in 2011,” RBC’s outlook report conceded.
However, the situation this year will be totally different with most experts forecasting that a turnaround will visit the banking sector on the back of what is happening both in the United States and in Europe.
While economists have predicted slowdowns in the euro zone, efforts by political and economic leaders in the region to finally resolve the continent’s debt crisis should spawn enough market confidence that in turn would lead to gradual improvement of America’s banking industry in 2012.
The trend would be sustained the rest of the year, analysts declared, as the sector’s fundamentals settle into solid ground, prompting some market experts to flag for buys of major bank stocks.
Case in point is JP Morgan, which Bloomberg said, serves as a gauge for the U.S. and global banking industries. That means numbers being published by the country’s second biggest bank are closely monitored not only in America but by the rest of the world.
In 2011, JP Morgan admitted that it took some form of hits and by the fourth quarter of the past year, the bank hinted that revenues would be at best flat as compared to the results seen in the previous period.
JP Morgan is slated to release the company’s financial results later this week, with analysts already predicting that earnings per share would dip by at least 17 percent on a year-over-year basis.
Notwithstanding JP Morgan’s obvious retreat last year, the overall encouraging picture in the sector prompted analysts to recommend buys for the bank and other American bank shares, buoyed mostly by indications that the U.S. and Euro economies would stabilize.
“We believe the risk of not owning U.S. bank stocks is greater than owning them,” Barclays Plc said on the report it released last week.
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