NEW YORK (
) --Investors waiting for bank earnings to get back to normal may need to change their definition of what normal is.
According to research published last week by Deutsche Bank, bank earnings are consistent with or just slightly below the median since 1975 by five different metrics. Revenue to assets, for example, are at 4.9%, compared to a 5% median since 1975. The median since 1934 is 3.5%. Starting in 1990 and leading up to the 2008 crisis, that number got close to 6%. Right after the crisis, it fell to about 4.5%.
Net interest margin peaked in the mid-1990's at about 4% and hit a post-crisis low of 3%, before rebounding to its current level of 3.5%--equal to it median since 1975. The median since 1934 is 2.9%. Similar trends are visible with expenses and provision expenses as a percentage of total assets,and non interest income as a percentage of total assets.
Return on assets has been far more volatile. It was well above 1% in the years leading up to the 2008 crisis, but then dipped into negative territory. It is now at 1.02%--well above the 0.76% median since 1975.
Those who take a longer view, then, could conclude that bank earnings were above normal in the 10 to 15 years preceding the crisis, and have only recently reverted to a level investors should come to expect.
Written by Dan Freed in New York
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