Good and bad news for the banking sector

Returns on equity in the banking sector reached a peak of 20 percent in 2007, though they averaged "only" 15 percent for the cycle up to the start of the crisis.

If the proposed new regulations come on stream in the US and Europe, I expect - here's the bad news! - returns on equity in this sector to come down to 8% or less. But the good news is that the returns will much more stable, the cycle smoothed. And the sector will continue to offer good returns when compared to other sectors. That is why bank equities will continue to be an essential part of any portfolio. Sphere: Related Content