In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche
Another reason why bank revenues are growing is that upper income families are making more money. University of Berkeley Economist Emmanueal Saez reported that the incomes of the richest 1% of US workers increased by 7.7% in 2015, CBS reported.
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If this trend progresses to its logical end bank tellers will disappear much like elevator operators did. It also raises a fascinating question: what will communities do with all those empty bank buildings?
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Buffett’s thinking is that Wells Fargo has so much money; it can simply pay whatever fines and lawsuit settlements that stem from the phantom accounts scandal, and still have cash to spare. This seems like an obvious extension of Warren’s famed belief that a good business is one your idiot nephew could run and still make money. Here’s how he described in a 2010 discussion with the FDIC:
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I’ve begun to really like bank stocks lately because they’re cheap and fast-growing but produce a lot of income. One
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If you are looking for a bargain in banking check out Bank of America and stay away from BOFI and EverBank, far, far away. My prediction is that both Bank of Internet and EverBank are heading for a fall into the single digit share value range real soon.
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MasterPass looks like a serious contender in the payment wars that has a few advantages over Apple Pay. A big one is the existing MasterCard payment network. One critical step the company has done is to get the big monster banks including BOA and Citi (NYSE: C) onboard. Notably missing is Chase which is pushing its own Chase Pay solution.
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Android Pay is spreading to more retailers and banks in the United States. Its most popular feature will be a rather old fashioned one – the ability to get cash. According to Mashable, some customers will be able to get cash from Bank of America (NYSE: BAC) ATMs using Android Pay.
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It is my belief that a few of these stocks can be used to create a low-cost growth portfolio that would be ideal for retirement or other long-term buy and hold purposes. These equities were chosen for their stability and durability, as well as their low price. Yet they have strong potential for growth, which is what makes them good buy and hold plays.
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The major economic factors that could affect US Bank’s future are growing income inequality and its underlying cause: wage and income stagnation in the U.S. Average incomes in 81% of the U.S. have not increased since 2000, and in some areas, they are substantially lower. This could affect banks such as US Bancorp because working- and, increasingly, middle-class households have less ability to pay off loans. More defaults and less overall revenue could be a result.
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Yet there are some clouds on the horizon because of dismal revenue growth. The real problem facing Bank of America and its competitors is falling revenues. The revenue drops at BOA are not as bad as in past years, but they are still worrying.
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