How did bank shares do in 2011? Bad. Incredibly bad, as we read here.
- BofA: -60.38%
- Citi: -44.76%
- Goldman Sachs: -46.41%
- JPMorgan: -23.03%
- Morgan Stanley: -45.24%
- RBS: -50%
- Barclays: -34.32%
- Lloyds: -63.02%
- UBS: -29.33%
- Deutsche Bank: -28,55%
- Crédit Agricole: -56.04%
- BNP Paribas: -37.67%
- Société Générale: -59.57%
Bank of America was the biggest loser among US banks. It is the #2 bank in the USA. In 2008, in the early phase of the real estate meltdown, it bought the subprime loan lending firm Countrywide Financial for about $4 billion. In doing so, it also bought all of the company’s liabilities. This turned out to be one of the most spectacular bonehead moves in banking history. Bank of America may lose a total of $53 billion on that decision. It has already paid out $33 billion.
It is safe to say that the executives at Bank of America did not have a clue about the economy, the housing market, or the degree of risk they were accepting. The recession was in progress. The real estate market was collapsing. But the bankers went ahead with the purchase.
In October, 2008, Congress bailed out BofA, along with the other Big 4 banks. TARP was a $700 billion bailout, which most voters opposed. Congress thumbed its nose at the voters. Then the big five banks thumbed their noses at Congress. The next year, 2009, Wall Street firms paid $145 billion in bonuses.
The Big 5 American banks are all struggling.
KBW also lowered its earning expectations at Citigroup to $0.45 from $0.75 per share. JPMorgan Chase will likely be the bright spot among big banks reporting earnings but nonetheless KBW still lowered estimates for Jamie Dimon‘s bank to $0.80 from $0.95 per share to reflect lower expectations for investment banking and trading revenues.
Goldman Sachs, which reported its second ever quarterly loss as a public company in 3Q11, had its estimates lowered by KBW to to $1.35 from $2.35.
Rival investment bank Morgan Stanley will report a loss, KBW says and materially lowered its 4Q11 estimate to a loss of $0.57 from $0.30 per share. “Although we are lowering our expectations for investment banking and trading revenues and increasing our expectations of expenses for seasonal factors, our estimate also includes a $0.64 charge for the MBIA settlement,” the note says.
America’s banking sector remains crippled. It remains fearful. It will not make loans. It keeps $1.6 trillion at the Federal Reserve as excess reserves. It is clear that bankers are afraid to lend, and small businesses are afraid to borrow
The recovery by now should have lifted the banking sector out of the pits. It hasn’t. It has been too weak. the recovery is barely operating. The voters know this. Meanwhile, Congress runs a deficit of $1.3 trillion a year.
The people running America do very well. They do not do much good.