The KBW Bank Index finished up 35% in 2013 - the most in 16 years. The S&P, by comparison improved 29%. Many banks were up more than 100%. 2014 looks good, but maybe not that good.
2013 closed positive for bank debt. Corporate, investment grade, debt at banks tightened 13bp more than industrials - first time since 2008.
One year probability of default for lending to banks is down to 18bp – the lowest risk on record.
Bank growth and population growth are correlated - US population grew just 0.7% last year – the lowest in 70 years!
The world’s oldest existing bank (founded 1472), Monte dei Pasche di Siena is on the verge of collapse. “Il Monte” is trying to raise about $4B in capital and is having a tough time.
Next to losing weight and getting organized, managing debt is the 3rd most common New Year’s resolution – perfect for bank marketing.
At the end of 2013, Banks ranked 5th for the industry with the most complaints to the Better Business Bureau behind cell phone providers, auto dealers, cable companies, and collection agencies. Total complaints were almost 16k. Mortgage related complaints made up more than half of call issues followed by credit cards. Collection tactics and trying to collect not owed were the largest functional category. Predictive analytics suggest bank complaints will materially drop in 2014.
After one of the best years on record, barely half of American’s viewed the stock market as a good investment for 2014 (according to a year-end Gallup poll). Everyone could always use more bank savings.
According to Wells Fargo, 80% of customer transactions don’t require employee assistance. Do you really need all that square footage of branch space for 2014?
Return on equity at banks is expected to be above 10% by year end 2014, a first since 2006. Performance will be mostly helped by credit quality improvement and leverage and hurt by mortgage performance and lower margins.
Submitted by Chris Nichols on January 07, 2014
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