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Global bank returns likely to stay low into 2017: McKinsey

Global bank returns likely to stay low into 2017: McKinsey

NEW YORK (Reuters) – The biggest global banks will have to take steps in the coming years, including cutting compensation and shedding services, to generate adequate returns for their shareholders, consulting firm McKinsey & Co. said on Wednesday.
Even as the global economy grows, new banking regulations will cut into profits so much that banks will earn returns on equity between 6 and 9 percent by 2017, according to McKinsey’s forecasts in a report on the banking industry.
Return on equity – a key metric for how effectively banks are wringing profit from shareholder money- was at least in the mid-teens for many banks before the 2008 financial crisis.
“The impact of regulation will be a continued headwind,” Kevin Buehler, a director at McKinsey and one of the authors of the report, told Reuters.
The firm noted that the Volcker Rule, which limits banks from betting with their own capital, and Basel III capital rules will likely be among the biggest drags on profitability.
New banking rules are designed to prevent the next financial crisis. Banks’ poor lending practices, bond underwriting, and risk management last decade contributed to the near collapse of the global financial system and a protracted global recession.
But new rules will also cut into profitability, and with low returns, the top 13 banks must take measures like eliminating unprofitable products and cutting employee compensation, McKinsey said.–sector.html

The Media is Misreporting the Housing Turnaround Story

Imagine that your financial advisor called you up one day and said: “Great news…your investment portfolio gained 1% in January which is an annualized return of 12%.  However, we have to subtract .05% from that return because historically January’s return has only been 0.95% since 1950.  This brings our seasonally adjusted return to 11.4%.” Of course, after…

SPX, BKX, RUT: Russell 2000 Approaches Key Long-Term Pivot- Pretzel Logic

The rally has, so far, continued largely unabated, which is what I expected on January 2.  As I warned at the beginning of the year, this rally appeared to fall in the third wave position, which meant to watch for upside surprises and little in the way of downward corrections.  Third waves are powerful trending…

Survey Report – Happy Days for NA Oil and Gas North America to Hold Greatest Growth Opportunities in 2013 Seismic Shifts: The outlook for the oil and gas industry in 2013, is an annual litmus test for industry sentiment in the year ahead. North America will hold the greatest growth opportunities in 2013, with the U.S. seen as the industry’s number one investment destination…

The Hipster Techie Mental Map – Charles Hugh Smith

This is a syndicated repost courtesy of oftwominds-Charles Hugh Smith. To view original, click here. Reposted with permission. Washington D.C. is not even on the Hipster Techie mental map. We all have inner maps that assign awareness, priority and importance to geographic features. For those who work inside the Beltway, Washington D.C. dominates their mental map…