Tuesday, February 8, 2011

Bank stocks in NYSE - will they follow the Malaysian experience?

I know it sounds weird that I post a question on whether US Banking stocks may follow the Malaysian trend. Back in the 90s, if you remember as a Malaysian investor, there were more than 10 local banks. Then came Daim, who personally has his hands on several of the banks (do not want to name them). As a Finance Minister, he sort of forced the Malaysian banks to merge. These merger augurs well for the more efficient banks such as Public as their performance better many times. CIMB has its run as well, with Nazir taking over the helm. (He basically manages it better than any other managers pre-his period considering that it was a former BBMB)
Anyway, back to my question - why did I think of this?
Well, US banking system for a start is not as recent or innovative as Malaysian banks or any other financial systems for that matter. There are today more than 6,00 banks still. Considering that and due to the financial crisis, they seriously need to consolidate. You see that in Bernanke allowing some of the smaller banks that are not able to survive to fail (and later merge with the bigger competitors). Well I am agreeing to this although the government has historically rescued the big banks that were sort of too big to fail.
With the consolidation of the regional banks, the big banks are now dominating the scene. The big 3 i.e. Wells Fargo, Bank of America and JP Morgan controls more than 25% of the deposits in US. I believe if the big banks are managed well, we will see a similar trend in what has happened in Malaysia.
Hence be in a watchout for well managed big banks in US - Wells Fargo (USD32.2) and JP Morgan. Watch out this space.

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