Bonnie Baha: The Big Banks Look Like Legacy Airlines

“Deleveraging, though necessary, is not a business model.”

The big bank stocks rallied hard to start the year off, but it looked and felt like the ultimate sucker’s rally and indeed it has already begun to unwind.  Other than a small position in JPMorgan and some indirect ownership through Berkshire Hathaway, I don’t want anything to do with the big bank stocks.  I have no idea how they’ll ever get into a growth phase again.

One of the smartest things you’ll read all day is this take on why the Big 6 aka the Systemic Six banks look like legacy airlines these days.  It comes to us from DoubleLine corporate bond portfolio manager Bonnie Baha

To my way of thinking, the big banks share a common problem with their old-line counterparts in the airline industry. Like the legacy air carriers, the top banks in this country have yet to find a sustainable profit-making model in a changed world.

Consider the latest round of quarterly results. Earnings quality was mixed at best. Profit “growth” at Bank of America, for example, was primarily fueled by asset sales and reserve releases – one-time events unlikely to be repeated. Even JPMorgan Chase found it necessary to refer to the banking industry’s “malaise” when discussing the decline in pre-provision profits. A bird’s-eye view of the structural issues looming on the horizon makes me feel like a white-knuckle flier. I don’t want to get on the big-bank plane.

Like the legacy carriers, the big banks have been slow to adapt to the new order. Pan Am exemplified what commercial flying used to mean: glamour, comfort and a free hot meal. Then came the 1973 oil crisis. Fleet overcapacity and embedded cost structures conspired with the new reality of oil price-fixing by OPEC to turn Pan Am into a money pit. Corporate consolidations and capacity reductions ensued, but Pan Am never returned to solid profit growth.

Keep reading:

Big Banks Lack Convincing Business Model (American Banker)

Tags: $JPM $XLF $BRK-B

Tags: , ,

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. commented on Sep 22

    … [Trackback]

    […] Read More Information here on that Topic: […]

  2. bitcoin blazing trader commented on Sep 26

    … [Trackback]

    […] Read More Information here to that Topic: […]

  3. 안전공원 commented on Oct 16

    … [Trackback]

    […] There you will find 44946 additional Information on that Topic: […]

  4. cryptocurrency news commented on Nov 16

    … [Trackback]

    […] Find More Info here to that Topic: […]

  5. Intelligent automation strategy commented on Nov 27

    … [Trackback]

    […] Info to that Topic: […]

  6. tangerine banking log-in commented on Nov 27

    … [Trackback]

    […] Find More here on that Topic: […]

  7. Harold Jahn Prosperity Investments commented on Nov 27

    … [Trackback]

    […] Information to that Topic: […]

  8. Devops Solution commented on Dec 01

    … [Trackback]

    […] Here you will find 47275 additional Info on that Topic: […]

  9. Rescue Towing Company commented on Dec 12

    … [Trackback]

    […] Find More on that Topic: […]

  10. 5d diamond painting commented on Dec 29

    … [Trackback]

    […] Find More on that Topic: […]

  11. wigs for women commented on Jan 17

    … [Trackback]

    […] Find More on that Topic: […]