It now appears that bank stocks are cutting down on the amount of risk that they are willing to take on. The Goldman Sachs Group, Inc. (NYSE/GS) is now at a point where the potential loss that can occur from trading is at a seven-year low. The other major Wall Street banks are also seeing a reduction in their risk. (Source: LaCapra, L.T., “Goldman trims risk-taking to lowest level in 7 years,” Reuters, March 1, 2013.)
The major bank stocks all closed 2012 near their respective 52-week highs and have started 2013 with a bang, with the KBW Bank Index up 5.8%, slightly below the comparative return of the S&P 500 and the Dow, but above the NASDAQ. The attraction to the bank stocks has been driven by an improving banking industry that is assuming less risky businesses while shoring up their balance sheets and producing stronger units.