Tags: bank | america | Meissner | weakness

BofA’s Meissner: Rest of 2012 to Be Dismal for Banking Sector

Monday, 02 July 2012 12:27 PM

Financial institutions, investment banks especially, will suffer in the rest of 2012 thanks to weak demand for merger and acquisitions services, says Christian Meissner, global head of investment banking at Bank of America Merrill Lynch.

Expect more layoffs and cost-cutting measures during the second half of the year to make up for reduced fees stemming from declining business.
"2012 is not going to be a great year by any means," Meissner tells the Financial Times.

"There might be brief bursts of activity and the odd good month, but we really need the macro issues to be solved."

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Many banks have already slashed their payrolls and may now close down weaker business divisions to streamline and stay afloat, other experts point out.

“A number of banks have come to the point where they will have to make important structural decisions re-evaluating their overall business model,” says Thomas King, head of investment banking in Europe, Middle East and Africa at Barclays, the Financial Times adds.

Advisory fees from mergers and acquisitions as well as debt and equity issuance hit $32 billion in the first half of this year, a 25 percent drop from the first six months of 2011, the Financial Times adds, citing Thomson Reuters data.

Moody's Investors Service recently slapped downgrades on 15 international banks and securities firms, including Bank of America, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley, due to declining prospect for long-term profitability and growth.

One banking analyst, however, criticized the move, citing banks stocks are oversold.

“This is one of the most absurd things that Moody’s has ever done perhaps in the history of the company,” says Dick Bove, Vice President of Equity Research in the Financial Sector at Connecticut-based Rochdale Securities, according to CNBC.

“In any metric that you look at… the banks have shown improvement in earnings in every one of the past 11 quarters year over year. If you go into the bond market, where Moody’s did the downgrade, prices of bank bonds are going up. Not only are they going up, they are going up faster than the prices of Treasurys, so what in heavens’ name is Moody’s doing?” Bove says.

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Monday, 02 July 2012 12:27 PM
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