Bank of America: Prop trading ban to hit hard |
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| Economy | |
| Written by Gary Howe | |
| Wednesday, 27 January 2010 | |
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Morgan Stanley offers a tentative insight on Obama's bank plans will hurt the bottom line.
Bank of America Corporation (NYSE:BAC) could see earnings slashed by up to 5% should the US go forward with President Barack Obama's plans to cut out excessive risk taking by banks. Morgan Stanley (NYSE:MS) has released research that suggests that Bank of America Corp could be particularly hard hit by such measures. Morgan Stanley suggests that earnings at JPMorgan, Bank of America and Deutsche Bank could be cut in the region of by 3-5 per cent. The FT says analysts are however more bullish on US banks than their European counterparts because they believe the another big set of regulatory proposals – from global banking regulators based in Basel – will hit European banks harder than those in the US. That said, the full impact of Obama's plans are still hard to quantify at this stage because all analysts have are the broad outlines of the plan. There still remains a degree of uncertainty and the full impact these plans have on banks like Bank of America Corp will depend heavily on how the legislation is drafted and whether Congress modifies the proposals before adoption. The Morgan Stanley analysts did not look at the impact of the proprietary trading ban on their own bank or at Goldman Sachs, which historically has drawn the highest share of revenue from proprietary trading and investment. Morgan Stanley’s analysis is somewhat gloomier than some issued by Citibank analysts last Friday. "They found that JPMorgan and Bank of America were at risk of losing 1 to 2 per cent of revenues, while Goldman Sachs could lose 10 per cent and Morgan Stanley could see a fall of 3 to 4 per cent," reports the FT.
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