It is increasingly clear that 2012 could be the year of a new global recession. Yesterday the United States lowered its quarterly growth predictions from 2 to 1.8%, and it is yet to be seen how its major banks perform on the stress tests that the Federal Reserve (Fed) submitted them to in order to analyze the financial sector's capacity for facing a world economic collapse during the next year. Results of these stress tests should be published in mid-January.
The fear, along with Basel requirements, has caused experts to reduce earnings predictions by 14.6% since September for major US banks, categorized by firms who expect to have more than a 5 billion dollar capitalization in 2012.
Economic instability in the eurozone and the possibility that the sovereign debt crisis will cross the Atlantic has made an impact on the US banking sector, where predictions for 2012 have in hardly three months gone from 95.25 billion to 81.34 billion dollars. Bank of America, JP Morgan, Citigroup and Goldman Sachs are the first that have suffered the sharpest cuts from analyst houses. In total, these firms have had their earnings slashed by more than 2 billion dollars.
The woes of Bank of America
The lender led by Brian Moynihan is about to close out a horrendous year. Its shares were the most bearish on the Dow Jones throughout 2011 as they dropped nearly 60%. Further, perspective results for next year have fallen more than 4.2 billion dollars during the same period of time. That said, these could be the least of Bank of America's worries.
Many think that Bank of America is "too big to fail," but their situation is certainly precarious. Warren Buffet has pumped some 5 billion dollars into the bank, but authorities continue pressure the lender by asking them to increase capital reserves in order to guarantee its survival without a bailout.
