Charting Banking VI: industry profits
In trying to understand the state of the sector, the sharp recovery of the financial industry profits has been the most surprising event. Here is graph from a Moody’s recent presentation based on national accounts data:
The main reason for this recovery despite the heavy losses of several banks between 2007 and 2009 was the big bailout that we discussed in the first installment of the series. This low interest rate environment combined with less competition has been a boom for the survivors. And even those on the edge are recapitalizing and may have a second chance.
The big implication is that since the USA still has an economy heavily dependent on the financial industry, as can be seen from this chart from a recent column by Paul Krugman , its ability to profit its way to health is good news.