Chillin' out till it needs to be funded
The evidence is undeniable in the United States. In fact Michael Moore has already written the demise of the sector under how Moore’s law applies to Banking (at Business Week)
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The Retail and Commercial Banking Sectors followed in the heels of the super traders by the first Quarter of 2011, losing trading revenues, credit card markets, retail banking fees and mortgages. Much is wrong with the sector and not just Dimon and Diamond playing the field with the regulators, a lot of interest groups have been involved in making sure that the 2500 page Dodd Frank act is not really doing all the things required and that the European though much over regulated at least have a finished agenda, with a five-ten year calendar for the BCBS recommendations.
Business is slow. Retail Banking has thankfully for the consumer been asked to cut down on overdraft fees and also on merchant fees on card transactions. Each of these measures alone is costing Bank of America, Citi and Wells Fargo as also everyone else in the US domestic Banks more than $12 bln. The Competition Commission could well be stationed under water in the pond, the way they have shot down International units for ING, RBS, ABN and more. The remaining Deutsche Bank and HSBC are fighting their own battles targeting cutting costs in retail banking
Credit Card business has lost almost 10% volumes year on year in legit trade. On top of that, the merchant fees loss of $12 bln means the banks in the States also have to look to under-banking having already found a retail super store unworthy of its constituents in many districts. With retail business likely to enter a period of slow death and unemployment inching higher banks are going to have a hard time even after printing new plastic and with new terms and conditions and higher APRs ( by 30-40%)
Most serious of retail banking ailments is the home equity, variable loans and the standard mortgages business that is worth more than $2-3 billion each quarter at Bank of America, J P Morgan and Wells Fargo ( Wachovia) With 2 out of 3 banks still trying to digest large mergers and non performing business in its core categories adding to their large non performing credit woes, each is trying to bank on the Securities and Capital Markets and Emerging Markets businesses in different ways.
However, regulations are unlikely to get easy for them either in maintaing Securities and Broking and Insurance businesses under the same umbrella or in even offering dividends to stock holders let alone grow internationally. A Citi and an HSBC from across the pond in the mean time will find many other Market sstructures impeding their positioning as their own businesses internationally and locally need to be reorganised. Each is jetissoning expensive investments in the states and in many other markets in Europe and even the emerging markets as political barriers in Russia and Latin America do not suit their cost sensitive investment intensive retail models compared to Corporate Business.