“Is it possible that the great big bank stock rally is already done? Shortly before the closing bell on Tuesday came words of warning from Fitch Ratings that the U.S. banking sector’s improved results in the first quarter were going to difficult to sustain for the rest of 2013. We just recently highlighted some of the risks of this in our “Sell in May and Go Away” primer and blueprint for 2013 and this goes well beyond the bank sector risks. Fitch’s warnings go many steps further and the result is that unless bank stocks correct further then the share prices will be very hard to maintain…”
Some of the issues are very focused for investors. Fitch showed that overall revenues broadly fell for the large U.S. banks even though net income improved on a linked-quarter basis. Lower provision expenses and cost controls managed to mitigate poor revenue figures. While expected, Fitch also said that a decline in mortgage refinancing activities managed to helped bank earnings. Fitch did signal that it now expects mortgage revenues to decline throughout the banking sector in 2013 due to lower refinancing activities. Here were some additional points made….”
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