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Baring Sees Banks Sailing Into Stormy Weather

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Investor optimism about bank stocks may be unrealistic, a securities analyst warns.

The average price of the world’s bank stocks has been doing poorly since Aug. 18, rising just 1.8%, while the price of all stocks has risen 6.7%, according to Nudgem Richyal, an investment manager at Baring Asset Management, a unit of Massachusetts Mutual Life Insurance Company, Springfield, Mass.

Richyal predicts in a comment on the market that bank stocks may continue to lag.

Writedowns of assets such as mortgage-backed securities and collateralized debt obligations could hurt, Richyal writes.

Meanwhile, Richyal writes, banks that have fueled their growth by getting cash from other institutions, rather than from individual savers, are facing higher costs for institutional money.

The high cost of institutional money may be squeezing those banks’ margins, Richyal writes.