Yikes: Obama Welcomed Back For 2nd Term By Bank Stocks Plunging – Are They Bargains?

Wall Street’s major banks saw their shares fall abruptly this morning, alongside the broader market, as investors hopes for a bank-friendly Romney administration were dashed.

JPM Chart

JPM data by YCharts

Low interest rates – the work of the Federal Reserve, trying to spur investment, borrowing and ultimately employment – may be a bigger near-term threat to bank earnings than elements of the Dodd-Frank regulatory package, passed in the wake of the 2008 banking crisis. Low rates squeeze bank margins. Bankers have exaggerated the threat to their industry from regulation, and of course underplayed the threat to the economy of letting banks continue to engage in risky activities while having the backing of the Federal Deposit Insurance Corp. and the Fed. Dodd-Frank was much watered down by the time it passed.

Their businesses are highly profitable franchises, so long as they don’t do something stupid. And today’s decline may be a nice buying opportunity. YCharts reported yesterday that fund manager Don Yachtman had loaded up on Bank of America (BAC) and AIG (AIG) shares of late – not because they’re great companies, but because the market had beaten the shares down so far.

Now, shares of JPMorgan (JPM) and Citigroup (C) are cheaper, too, as well as Goldman Sachs (GS) and Morgan Stanley (MS). Showing a slighter decline, Wells Fargo (WFC) and U.S. Bancorp (USB) are better-run institutions with less exposure to trading and investment banking.

WFC Chart

WFC data by YCharts

Wells and U.S. Bancorp have a long history of outperforming the Wall Street banks.

WFC Return on Assets Chart

WFC Return on Assets data by YCharts

Jeff Bailey is the editor of YCharts, which includes the just-released YCharts Pro Platinum for professional investors.



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