Stephen Scherr, Goldmans chief financial officer, wisely warned that ROE is “unlikely to go high” in the long run. Completely like that. The market boom can stop; credit losses may increase due to a large number of weak, over-covered US companies; and economic growth may slow down by 2022 or 2023 when stimulus is narrowed, creating the so-called “fiscal cliff”.
There’s also a hidden dark cloud hovering over this week’s earnings: slower than normal loan growth during economic expansion. That may reflect low business confidence, but last year’s government loan programs also appealed to banks.
However, even with these warnings, the reality is that the major US banks are on the rise. Jamie Dimon, head of JPMorgan, predicted “extremely strong, many years [economic] growth ”in America. It is a striking contrast to Europe.
Late last year, the European Central Bank warned that the European Bank was “profitable [is] It is unlikely to return to pre-pandemic levels before 2022 ”and the average forecasted ROE for the eurozone is only 3.1% by 2021 and 5% in 2022. Due to the zone’s growth forecast The euro zone has recently been downgraded, maybe even that is optimistic.
Low interest rates are hurting eurozone banks further. Zero, or even negative, ratios have been bad for all Western financial institutions over the past decade or so. But usefully, at least in the US, the yield curve appears to be spiking. The Federal Reserve appears determined to keep short-term policy rates low, while inflation worries and economic optimism have pushed long-term rates higher.