Big banks off to favorable start in 2013

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Now that the big banks have reported earnings for 2012, what's the prognosis for 2013?

It appears that the capital markets side of the bank remains vulnerable. Fitch analysts have concluded that, "the outlook for major U.S. banks' equity trading and investment banking businesses may be brightening somewhat in early 2013, but weak volumes and a still sluggish M&A environment are likely to hold back revenue growth in the near term."

It also notes that capital markets revenues for the top five U.S. banks rose nearly 40 percent year over year in the fourth quarter, with FICC leading the way--despite the typical seasonal slowdown. The first quarter tends to be a strong one in terms of investment banking and trading.

So while we may see a continuation of the strength, it's hardly a sure shot. It should be noted that modeling FICC results are among the most tasking for analysts. Still, there's plenty of reason to be bullish on continuing FICC gains. If Washington politicians can resolve the debt and fiscal cliff issues, the gains may intensify, however.

All in all, you have to wonder if banks with strong offset potential in the form of consumer mortgages operations are positioned well right now. Such activity looks strong, as does core wealth management. So the diversified banks may be proving that the more diversified banks with consumer operations may be among the best bets going forward. -Jim

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