Some troubling signs indicate that U.S. banks will continue to be susceptible to the same pressures as their European counterparts. The latest CDS prices bolster the case that European bank worries are spreading to U.S. banks. As the accompanying chart shows, it now costs more to insure Morgan Stanley and Bank of America debt for 5 years than Italian bank Intesa Sanpaolo.
REFRESH CHART
IBES aggregate analyst forecasts also paint a fairly grim picture for bank return on equity. The accompanying charts for Europe and U.S. banks reveals that 12m forward ROE estimates are now well below the pre crisis range.
REFRESH CHART
Upcoming earnings releases are likely to provide further confirmation. As seen in the charts below, StarMine SmartEstimates (blue lines) for JP Morgan and Goldman Sachs earnings are well below consensus (gold) for the quarter.
JP Morgan – FQ Sept 11 EPS
Goldman Sachs – FQ Sept 11 EPS
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