Industry analysis. Financials.

Really it is hard to imagine any banks are in trouble with everything the US taxpayer has given up for them....
It is widely agreed that the banks are undercapitalized.
Further confirmation that the various central bank liquidity facilities and capital injections are having the desired effect of unclogging credit markets comes from Goldman Sachs’ Financial Stress Index (FSI). This index includes four factors related to the degree of impairment of financial markets: counterparty risk (US dollar 3-month LIBOR-OIS), liquidity risk (MBS to treasury repo differentials), refunding risk (commercial paper outstanding) and broader risk aversion (percentage of monies held in money-market mutual funds in relation to equity market capitalization).

FDIC's Fund Reserve Ration Plunges to 0.27% of Deposits. Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, released the latest information on “problem” banks on Wednesday. The list now includes 305 institutions, up from 252 at the end of 2008. We have had 36 bank failures this year and if no more than a quarter of the “problem” institutions fail, we will be over 110 bank failures for the year. But i think thats a delay indicator. Bank closures are not a leading indicator of economic health and can continue for some time even after the economy begins to recover. A lot from deposits will be invested. We havent much risk on it now. President Barack Obama on Wednesday afternoon signed into law two major housing bills, one of which would allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department to protect the deposits of bank customers.
On the financials - we can use GS as an indicator of health. Goldman Sachs (GS) is one of the few companies with increased profit estimates in the marketplace today. Over the past 90 days their current quarter profit estimates have increased from $1.92 a share to $2.44 a share, a 27% increase. Likewise the next quarter estimates and the year profit estimates have also moved higher with the analysts that cover the stock.
Some banks announced that they will be able to begin to repay the government.
We see that bank's CDS become to cost less.
Goverment are all in financials, they will not give one more time possibility to drop.
The Fed, in a report issued Thursday, said commercial banks averaged $38.153 billion in daily borrowing over the week that ended Wednesday. That was down slightly from $38.155 billion in the week ending May 20. Investment firms didn't draw any loans over the past week from the Fed program. In the prior week the firms also took a pass on the emergency loans, something that hadn't happened since early September. Firms drew just $482 million in the week that ended May 13. Good trend.
Conclusion If nothing will be changed - we will see big growth in financials. It will not be exponential, just strong selfpowered trend. We have risks, but more we growing in financials - less risks we have. More financials shares getting up - more confidence crodw will have on it. More confidence crowd will have - less wholes in balance sheets we will see. Governments main target - to keep crowd confidence about finacials growing. So we will see a proccess which very nice described by Soros theory of reflexivity. Banks are good look by classic fundamentals, exept wholes in their balance sheets. But i write above how rather quick this wholes can disappear. The contrarian opinion analyses saying that financials are interesting for long. The most people just saying about stability growth in financials but still dont make big bets on it. So, nice potentional for growth, maybe only speculative now, but speculative growth can be a reason for a next fundamental growth.