NEW YORK (
) -- U.S. banks face the worst revenue decade since the great depression, CLSA analyst Mike Mayo told
The analyst said U.S. banks might see a prolonged period of very weak growth, similar to that experienced by their Japanese counterparts in the nineties. "Just as you saw in Japan, there's lack of loan growth, there's margin pressure, and there's revenue pressure...so it's a combination of factors that are leading to very weak revenue growth," he said.
While Europe's debt contagion will continue to weigh on capital market revenues of universal banks, the cutbacks to fiscal spending in the U.S. will also weigh on growth, according to the analyst.
Mayo has been bearish on banks and was among the early predictors of the financial crisis. He has an underperform rating on
Bank of America
and an outperform rating on
The Japanese parallel has been drawn by other analysts as well. Glenn Schorr and Brian Foran at Nomura argued in August that the market was already pricing in the risk of "no growth and limited profitability forever."
"The underlying driver for why Japan and the US would be similar is that both are stuck in balance sheet recessions, where individuals and businesses are shrinking debt regardless of cost. Thus, even though interest rates collapsed in both countries, bank debt is shrinking at a similar pace," the analysts wrote in a note.
However, there was a divergence in that in the U.S., non-real estate economy had rebounded, evidenced in the non-real estate loan growth.
Also U.S. banks had recognized losses faster, so the U.S. bank cycle could be shorter.
Others in the analyst community have been more bullish. On Tuesday, analysts at Oppenheimer argued that bank stocks were
and that despite low interest rates banks could earn a relatively competitive rate of return, due to positive offsets such as improving credit quality and cost cuts.
--Written by Shanthi Bharatwaj in New York
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