This WSJ article seems to not really understand bank business models or the current environment. Right now banks are overloaded with huge litigation and regulatory costs which are effecting profitability. In addition net interest margins are artificially low due to actions from the Federal Reserve. As these issues reside, bank profits should grow. In addition I’d really like to know how the cost of capital is being calculated. Considering many of these banks have 80% of liabilities in deposits costing less than 1%, and can issue debt at sub-4% rates I really wonder how they get the numbers they are getting. Banks have more capital than they have ever had. Once the economy actually moves forward and regulations become more clear it is very likely that many of these banks will post return on tangible equities of 15% plus. Intangibles will effect some banks more than others. The reason why you don’t see more mergers is because of the punitive SIFI regulations which require larger institutions to hold more capital. These growth-reducing regulations have hurt the economy through stifling credit creating, and in turn have hurt bank profitability.
INVESTING IN THE FINANCIAL MARKETS INVOLVES RISKS. OPTIONS ARE NOT SUITABLE FOR ALL INVESTORS.