The financial markets have been waiting for spring longer than slowly thawing Brits who have endured the coldest winter since 1962-3, but forecasts for the Q1 2013 results of financial sector stocks suggest we may have to wait a little longer.
In anticipation of the first quarter reporting season, Bernstein Research's financials team asked 'Will the Green Shoots of Spring Lead to the Bounties of Summer?' only to give the depressing reply 'probably not'.
Despite most financial stocks appreciating since November 2012, some by more than 20%, Bernstein asserts "Q1 2013 earnings may prove to be somewhat of a disappointment for investors hoping for a solid rebound in cyclical revenues".
For institutional brokers, equity market commission revenues and "rebounding" FX activity will bolster performance, but investment banking revenues will be down slightly on the previous quarter. Bernstein adds that fixed income trading revenues are "unlikely to impress" and that the euro's continuing problems cast a pall on a full-blooded recovery. The firm's analysts also argue that net interest will remain under pressure across the sector while the US Federal Reserve maintains its Zero Interest Rates Policy.
Before you return to hibernation, Bernstein gives reasons for hope in the longer term. While the debt underwriting outlook remains strong in both Europe and the US, it is the latter that is offering real signs of green shoots, in the form of equity underwriting, M&A, equity commission revenues and positive signs on housing and consumer demand.
"These positive forces will likely remain in place in the coming year and the headwinds that have limited the performance of the sector in the recent years should decrease," Bernstein summarises.
But don't expect the rising tide to lift all boats at once. The firm posits that financial sector players respond to an upturning economic cycle at different stages, with investment banks responding before futures exchanges, asset managers and custodians, with wealth managers as "relatively late cycle plays" on account of their tendency to track employment trends.
Spring and indeed summer may be closer for some than others.