By Bret Jensen:
There was a solid article in this week’s Barron’s, an industry standard weekly magazine. Barron’s interviewed Richard Pzena who is the CEO of Pzena Investment Management (NYSE:PZN); a firm that manages billions of dollars thorough a variety of entities.
Mr. Pzena made the long term case for owning some of the biggest banks. He believes three of the big drivers of earnings should improve significantly over the next couple of years.
- A current headwind for bank earnings is low interest rates which have confounded pundits in 2014 by declining significantly even as the economy seems to be accelerating recently. As a result, net interest margins are historically low. With the Federal Reserve finally ending its last quantitative easing program in October, interest rates should be nicely higher by the end of the year or early 2015. This should boost net interest margins and profits.
- Trading volume has shrunk substantially recently
