I don't mean the weather here, of course. We just had one of the most beautiful Indian Summer weekends I can remember. Nor am I referring to the Buffalo Bills, with 4 wins in their first 5 games this season. No, that cold wind blowing this fall is for America's banks.

Over the next few weeks, banks large and small will be reporting 3rd quarter earnings, and expectations are, at best, modest. Why should anyone care? After all, the biggest (and some midsized) banks made billions in bad loans and had to be rescued by taxpayers. I am happy to let banks live (or die) by their decisions, and they have made a lot of bad ones lately. But soft earnings can have an effect on bank customers. There has been news (and controversy) lately about new fees imposed by Citibank, Bank of America, and others. Those fees are a direct result of lower earnings at the banks. After all, a bank is a business, and they can't print their own money. All those branches have to be maintained and employees paid. When you paid 7.5% for your mortgage, 9% for car loans, and 18-20% for a credit card - and the bank paid you 1% on checking and 4-6% on savings and CDs - there was enough "net interest margin" for banks to give away debit cards and checking accounts along with free coffee in their lobby. Now you get next to nothing on savings accounts, mortgages are below 4% and you can get a car loan for less than 2%. Which means free debit cards (and maybe the coffee) are in jeopardy. Some think that's a good thing.

Bank earnings are worth watching for shareholders, too. Though the biggest banks have cut or eliminated their cash dividends, many small banks still pay generously. If net interest margins can't be maintained, neither can dividends. Shareholders need to watch out.



(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).