Bank industry approaching a new era

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At this point in the banking industry, it's appropriate to ask: Is the glass half full or half empty? Obviously, bank stocks have been on fire for the last year. Bank of America ($BAC) roared to a more than 100 percent gain. Other banks followed in the same direction.

And yet, the Washington Post points out that bank stocks still trade well below their tangible book value per share and at just 50 percent of the prices hit in 2007. So do stocks continue to rally and soon hit book value per share, or is this about all we can expect of them?

Every analyst has an opinion, but they will always be a rather bullish lot collectively. Most are still recommending big banks, including Richard Bove, who thinks we are at the beginning of a 14-year virtuous cycle.

The industry may indeed be close to some sort of inflection point. I certainly hope that we're entering an era of renewed prosperity, as the economy slowly gathers steam and interest rates begin to rise. More hedge funds are willing to make that bet these days. But still expectations need to be wisely set.  

Given the new rules and regulations, it would be unwise and unrealistic think that we're somehow destine to achieve our former high-water mark as an industry. The new normal may be much less interesting than the pre-2007 normal.

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