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Regulation, rates and real estate: the new world of banking

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We've seen Goldman Sachs beat market expectations this earnings season with a five percent profit rise and higher revenues from lending and investing. Although other banks, JP Morgan for example, saw mixed results, it can be argued that the bankers are back after six years of recovery from the global banking crisis.
Morningstar analyst Jim Sinegal has been reading between the lines of the latest results from some of the largest US banks and financial companies. The overall themes are regulation, rates and real estate. Jim points out that; "On the regulatory front, it continues to cost banks a lot of money. We saw JP Morgan invest a lot in internal controls. It seems that Deutsche Bank has been providing faulty data to regulators for a number of years, and Discover, now is having trouble with bank secrecy and money laundering. So expenses related to increased regulation are not going anywhere". 

As for rates, Jim injects a note of caution: " I'm a little less optimistic. We have the most dovish Fed chair in a long time. It looks like she's willing to keep monetary stimulus going as long as it takes to get the economy back to normal, and it's not so much that will only benefit banks. It's hurting them on the interest revenue side, on the lending side of the business, but it's helping in terms of asset management, M&A, and things like that."  

The overall assessment is that the new world of banking is costing more as financial companies continue to emerge from the trauma of the global economic crisis.