NEW YORK ( TheStreet) -- As a whole, the financial sector fares better than it did a year ago. However, despite stellar quarterly earnings reports by some financial services giants like Goldman Sachs (GS) and JPMorgan Chase (JPM), the sector is still not in the clear.
Most recently, the nation's largest life-insurer Met Life (MET) disappointed Wall Street, as it reported a book value short of what was expected. Many suggest that this was driven by the impact that financial derivatives have on balance sheets and the fact that these financial derivatives, which many blame for the recent financial crisis, are still prevalent in the financial sector.
To put a further strain on the sector, quarterly earnings by Bank of America (BAC) and Morgan Stanley (MS) both failed to deliver. Bank of America blamed its quarterly losses on the rising defaults in credit card debt and mortgage loans as well as its obligation to pay back borrowed money from the federal government and taxpayers. As for Morgan Stanley, the company took a hit as it tightened its credit spreads, which increased liabilities, as it continues to face struggles caused by the credit crisis.
Additionally, bank lending, which is generally a huge money-maker, will likely continue to remain tight. Although most large banks are willing to lend, it all comes down to assessing risk and most lenders are reluctant to extend out a loan to a company who is in the red.To put a further strain on the lending front, business demand for loans is likely to remain weak. Two driving forces behind obtaining business loans are capital spending and inventories, both of which are expected to rebound, but at a gradual pace.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV