The return of bullish banks
“Investment bankers have their mojo back,” says the FT. Profits at the top nine global investment banks hit $78bn last year, topping their 2007 level, before the crisis hit. “The natural reaction, for anyone who lived through 2008, can be summed up in one word: sell.” Investment banks are “creatures of the good times” and, on top of their bullishness, there are now other indications of a cyclical top: assets are expensive worldwide, US business confidence is at a peak and tax cuts have delivered a big fiscal stimulus. If ever there was a moment for bankers to take on too much risk, “planting the seeds of a nasty downturn”, it is now. But one of the most compelling reasons to think the cycle is indeed turning is the poor performance of a different set of banks. The shares of 16 “systematically important financial institutions” in China, Japan and Europe have fallen 20% from recent peaks, putting them in a bear market. “None of this augurs a repeat of the crisis.” But these “slumping big banks may be telling us that the US cannot drag the global economy along by itself”.
