French banks are bringing most financials down; but US banks still in good shape, still want corporate business.
It’s certainly concerning that French banks have the most exposure to Greece and therefore face an uncertain future. And while US banks do have European exposure, they’re not as close to the flame, so to speak, as their European counterparts. This means they’ll continue to focus on corporate business.
US bank balance sheets are as healthy as they’ve ever been. This means treasurers shouldn’t be too concerned about the current rout in financial stocks — they still want a share of your wallet. Following the crisis and in preparation for strict regulation and capital requirements, US banks have much more capital, have de-risked their balance sheets and are once again relying on core funding (deposits). Not to mention they are seeing fewer loans going bad.
And the good news for US companies is that US banks continue to pay a lot of attention to them as they go after business. According to an Aite Group study, banks continue to pour money and resources into corporate banking IT and many other banks are rushing into the global transaction business.
Still there are concerns. According to a Reuters report, S&P recently said it was increasingly concerned about US banks profitability in the face of a slowing economy, sovereign debt issues and lingering mortgage problems. While S&P bank analysts acknowledged that bank credit ratings, earnings, asset quality and capital strength all improved in Q2, some are starting to rethink their formal forecasts for Q3. They called for a “moderate rise” in net income at US banks due to decreasing credit losses. However, banks could suffer from a “moderate decline in revenues,” the S&P analysts said, because of weak loan growth and low interest rates – something that will be good for corporates, however.
And while banks in France and the rest of Europe suffer through a chaotic summer – mainly due to their proximity – US banks will whether the current storm brought on by the S&P US debt downgrade. In fact, while S&P knocked US long-term debt down a notch, it has reiterated over the last few days that there will be no immediate effect on any large US bank ratings mainly because of coming Dodd-Frank rules on too-big-to-fail.