Thursday, March 18, 2010

Banking — Large Cap Banks Expect Senate Financial Reform Bill to Reduce Uncertainty $BAC $JPM

The draft financial reform bill is largely in line with our expectations and should reduce uncertainty. The bill addresses
four key areas: a streamlined regulatory structure, increased consumer oversight, resolution authority, and derivative regulation. Certainty on these issues should be a positive for bank stocks over time. The bill presented by

Senator Dodd on March 15 provides broad strokes, and leaves a lot of detail up to the regulators to determine the size, scope, and impact on the industry. The proposal outlined by Senator Dodd should reduce uncertainty in the Banking and Diversified Financials groups. We expect volatility to diminish over time as the Senate Banking Committee works this bill through the mark up and then the Senate floor for vote sometime before August recess.

We believe there is a high probability the proposed bill makes it through the Senate. The Senate Banking Committee
mark up is expected to occur over the next week, with voting expected to occur during the week of March 22, prior to Congressional recess. We then expect the proposal to go on the Senate calendar for vote before the August recess (with a ~20% probability that it gets pushed up to May), as we believe the Senate will be preoccupied

Banking — Large Cap Banks

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