Almost 600 U.S. banks have failed since 2000. Over 80% of those failures happened between 2008 and 2012. Has the problem been solved?
Global Rates & Money Flows editor Murray Gunn says maybe not so fast and shows you danger signs in this excerpt:
Credit Risk
We have expanded our Bank Health Monitor to include more regional U.S. banks. Where is your bank on the list?
We have also now included a similar analysis for European banks.
As you can see, the outlier in Europe is clearly Close Brothers Group. In January of this year, the U.K. regulator, the Financial Conduct Authority, announced that it would be investigating practices in the auto finance industry relating to discretionary commissions on finance deals which allegedly gave lenders and auto dealers incentives to artificially raise the interest rate for customers. The cost to the sector is expected to run to many billions of pounds.
The chart below shows the chart of Close Brothers Group share price. As so often happens, signs that trouble was brewing appeared in the share price performance long before any official announcement.
The share price peaked in March 2021 and the structure of its decline from then prompted us to write in May 2022, when the share price was hovering around 1,100p:
“We anticipate a decline below the wave (A) low of 849p.”
The price continued to decline and the sharp drop this year appears to be wave 8 of an extended wave 5. At this juncture it is too early to tell if Close Brothers Group will fail but, as long as its share price continues to underperform, the risk of that should be taken seriously.
Murray Gunn will continue to monitor the health of banks plus other important trends in his monthly Global Rates & Money Flows. Follow the link below to learn how you can stay tuned.