Investors should favor regional banks over the largest financial companies because of prospects for increased regulations, said Jason Trennert, chief investment strategist at Strategas Research Partners.
“We’d rather stick with more regional banks that are doing the real lending, than the big money-center banks that are going to have some regulatory overhang for quite some time,” Trennert said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said yesterday that the firm suffered a $2 billion trading loss he attributed to “egregious” failures in a unit managing risks. Federal Reserve Bank of Dallas President Richard Fisher said large U.S. banks need to be split apart because they operate with an implied government safety net that imposes their risks of failure on taxpayers.
“You want to be in places that are in more traditional, agency-type, utility-type financial activities,” Trennert said. “You want to avoid companies that have relied a lot on principle transactions to spur their growth because the regulatory environment is such that it’s going to be very difficult to do that, notwithstanding the risk that’s involved in it.”
Shares of JPMorgan (JPM:US), the largest and the most-profitable bank, dropped 7.4 percent to $37.74 at 12:39 p.m. in New York, the biggest decline since Aug. 8 on a closing basis.
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