Archive for October, 2012

At Big Banks, ROE Woe

October 16, 2012

Something remarkable happened Friday in the banking sector. No, it wasn’t J.P. Morgan Chase JPM¬†-1.60% & Co. and Wells Fargo & Co. kicking off the third-quarter earnings season by touting record profits. Or J.P. Morgan boss James Dimon declaring that the U.S. housing market “has turned the corner.”

The wondrous event took place deep in J.P. Morgan’s financial statements. Sandwiched between long numbers telling the story of the bank’s gargantuan size, sits a small “12,” closely followed by a percentage sign. To its left, the words: “Return on common equity (ROE).”

Banks aren’t earning enough to justify their existence. (more…)