Short-Term Pain Ahead For US Banks, But There Is Some Good News
Banks are to expect short-term pain after the vote the UK to leave the European Union, managing Director of CLSA and analyst Mike Mayo said Monday.
Mayo said in an interview with CNBC power lunch that he thinks that the largest banks have a risk of 10-15% for EPS over the next several years.
Financial shares dropped in the days after the vote the UK out of the EU on Thursday. On Friday they fell by 5.4% at rest, for their worst day since August 2011 and fell on Monday by 2.9 percent.
The largest US banks have a number of serious issues to contend, said Mayo. There are additional costs associated with its more costly to do business in Europe, plus the lack of risk is not good for capital markets, he said. There is also currency risk-the profit is transferred back to the United States, and Central banks will keep interest rates lower, said Mayo.
However, there is good news.
“America’s banks were healthy. European banks are now such a situation,” he said. “We believe that American banks are not eating European banks’ lunch. So this could be an epic market share grab in the next three to five years for banks”.
In addition, local banks a Bank is a financial institution that accepts deposits from the population and creates a credit only passed the first part of the test, fed stress last week.
“On this basis, us banks can absorb a few Brexits and still have strong balance sheets,” said Mayo.
He believes that there is potential to generate revenue. What could cause a problem if bond yields remain low in the next five to 10 years,” he said.
However, if you think everything is back to normal with time, this can be a unique opportunity within one year to five years.”