Welcome to 2009, the year the economy is supposed to hit rock bottom, the year the real readjustments of the GDP will show themselves and of course the year most banks that weren’t diversified will fail.
So far in 2009, 14 banks have failed and more are expected to follow simply due to understating their losses from the foreclosures for the past few years. This strategy of understating revenues for banks worked exceptionally well as investors would keep dumping more and more money in their stocks. Fortunately for us, and unfortunately for them this practice is soon going to end.
Once the recovery plan is in effect and the banks that accepted bail out money are obligated to make their finances transparent, we predict that investors will decide the bank’s faith. So who will fall next?
Well this is a bit more difficult to tell but looking at what we know about banking assets and what we know about upcoming losses some of these banks definitely look worst than others. Lets look at some of the big players and how they look for 2009?
Here are our picks for best and worst banks in 2009:
- Citi Group and Wells Fargo are on our radar for banks to watch as we believe they have taken more than they can bargain and will almost collapse if not fully fold in 2009. Citi Group is simply a sinking ship that cannot be rescued. Their sub-prime exposure is more than they can handle and unfortunately without another $40-50 billion borrowed from the TARP fund, they will sink in 2009. Wells Fargo on the other hand seems to have done a good job staying out of the media as a danger, I believe that they understated heavily in 07 and 08 but with the TARP program might face challenges if they had done so.
-JP Morgan Chase and Bank of America are on our top picks for most likely to reverse course and start growing again.They have made some bad choices like every other bank, but the mergers that Bank Of America took in 2008 and the diversified credit revenue JP Morgan Chase holds that contributes to their growth will help them live through 2009.
2008 was a tough year for most banks, 2009 will continue to be as well .The first 13 failed and more will follow.
Many questions come to mind when we think of 2009 .Many of which really have no answers as of today and that is another problem all together.
- Can FDIC really handle it?
- What happens to Main Street?
- How long do you have to hold off until Government helps you instead of banks?
When we start seeing these problems tackled and solved, we will start seeing increases in consumer spending that actually impact our economy and more importantly we will see investors back in the market.
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