The average investor in the United States is hiding better than anyone from the tumultuous European stock market and instability routing the international banking sector. He was hit hard by an avalanche of slashed earnings predictions this summer, as were other global banks, but a strong year end and start to the new year have improved the overall view of the financial sector. Current earnings predictions expect US banks to earn profits of 82.6 billion, which is similar to levels seen before Lehman Brothers fell.
The market consensus view for bank earnings went up around thirty percent compared to last year, but they are still far from the record 95.14 billion dollars that banks earned in 2006. At that time investors did not foresee the subprime mortgage disaster and the numerous public bailouts that American banks received in order to suppress the risk of collapsing the economy due to a failed real estate market.
Growth to provide some protection
The rally in US banks was helped by growth in the nation's economy and the banking sector's ability to "clean up their balance sheets using the TARP program, a process that happened more quickly and prior to anything the European banks have done," said IG Markets analysts Daniel Pingarrón. While there are talks of recession in several countries in Europe, the United States continues to project growth.