Executives, directors at nearly 100 community banks and regional players netted $1 billion in stock sales since election
Insiders at publicly traded commercial banks with a market value greater than $1 billion, but excluding the largest national banks, sold about $1.4 billion in their company stock between the election and the end of March.. Private-equity investors with board seats also sold. Four of them accounted for more than $310 million of the sales, or about 22% of the total, since the election. These same investors sold $46 million in 2016 before the election.
The Shattered Arguments for a New Glass-Steagall
Investment banking isn’t risky. What’s dangerous is creating stand-alone firms that can’t diversify.
The 1999 repeal of Glass-Steagall was unfairly blamed in the aftermath of the 2008 financial crisis. Some people—apparently Mr. Cohn among them—mistakenly believe that investment banking is so risky that it should be once again kept separate from commercial banking. The truth is exactly the opposite: Traditional investment banking entails very little risk. The danger is stand-alone investment banks that are not diversified enough to survive a shock.
Oil-Price Rebound Gives Banks New Reason to Cheer
The higher oil prices stemming from OPEC’s agreement to cut crude production should give some banks a boost.
.. In particular, higher oil prices could mean that banks will release some of the reserves they set aside earlier this year to protect themselves against soured energy loans. Such releases would increase banks’ earnings.
.. Bank of America Corp. rose more than 4% on the day, Wells Fargo—2%, J.P. Morgan Chase & Co.—1.6% and Citigroup Inc.—1.6%.
.. Fifteen of the largest U.S. banks amassed a combined $6 billion in reserves for energy loans, according to a Barclays analysis.
How Much Bank Stocks Can Gain From Higher Rates
In the earliest days of ultralow rates, banks benefited as their securities portfolios rose in value, loan defaults declined and funding costs dropped. Indeed, policy makers viewed low-rate policies as supporting banks and the broader economy.
Yet those benefits faded as loans refinanced at lower rates and one-time boosts to bond and loan portfolios ran their course. Over time, gains dissipated and lower rates remained, squeezing bank profit margins.
.. Between 1996 and 2006, U.S. banks had an average return on assets of 1.23%, according to Federal Deposit Insurance Corp. data. Since 2010, the average has been just 0.94%, the data show.
.. If U.S. banks had earned the precrisis average return, cumulative earnings.. would have been around $1.07 trillion. Actual earnings were around 27%, or around $250 billion, less, according to FDIC data.
.. Regulators have required banks to hold more equity. That, combined with lower returns on assets, has led to far lower returns on equity. Between 1996 and 2006, the return on equity for U.S. banks averaged 13.65%, according to FDIC data. Since 2010, the average has been 8.40%.