Banking on banks

(Elvis Picardo is an independent investment strategist located in Vancouver, Canada, and a guest columnist on reuters.com. The opinions expressed are his own.)

By Elvis Picardo

VANCOUVER (Reuters.com) -- There's nothing like a big bank pow-wow to remind investors that what was still is. The UBS Financial Services Conference in New York wraps up today, with a number of names, such as Bank of America, having announced more bad news for the sector.

It's not the end of the world, of course, but it's also not the end of the credit crisis that has taken a toll on share prices. Ironically, therein may be the flicker of light at the end of the investment tunnel.

Now in its 10th month, the crisis of confidence surrounding U.S. banks is easily the most protracted in a decade. You would have to go back to the summer of 1998 to pinpoint the last time a crisis of this magnitude erupted.

At that time, Russia's debt default and the collapse of Long Term Capital Management caused financial markets to wobble, until prompt action by the Federal Reserve in coordinating a package to rescue LTCM restored confidence in the markets.

In terms of time, however, that episode was a mere blip, lasting for only about three months. And although equity markets were rattled, they were quick to recover.

The current crisis, however, will soon be a year old. More telling is the fact that although equity markets have stabilized since the Fed moved to avert disaster in mid-March, bank stocks are still far from their 52-week highs, with a number of them within striking distance of their yearly lows.

Citigroup has been among the worst hit of the largest U.S. banks by the housing/subprime mortgage debacle. The banking giant's decline of 54 percent over the past year has resulted in its market capitalization falling well below that of Bank of America and JP Morgan Chase. While Bank of America itself is down 22 percent over the past year, JP Morgan Chase has fared much better in relative terms with a decline of only 7 percent.