Everyone knows that the major banks are still struggling these days, despite the crisis technically having ended years ago now.

Every quarter, investors are disappointed by the likes of Bank of America, Citigroup, and so on.

In a piece up at American Banker, Bonnie Baha -- one of the original DoubleLine Capital investment managers -- explains the problem.

Basically, they're the legacy airlines all over again.

To my way of thinking, the big banks share a common problem with their old-line counterparts in the airline industry. Like the legacy air carriers, the top banks in this country have yet to find a sustainable profit-making model in a changed world.

Consider the latest round of quarterly results. Earnings quality was mixed at best. Profit "growth" at Bank of America, for example, was primarily fueled by asset sales and reserve releases – one-time events unlikely to be repeated. Even JPMorgan Chase found it necessary to refer to the banking industry’s "malaise" when discussing the decline in pre-provision profits. A bird’s-eye view of the structural issues looming on the horizon makes me feel like a white-knuckle flier. I don’t want to get on the big-bank plane.

Like the legacy carriers, the big banks have been slow to adapt to the new order. Pan Am exemplified what commercial flying used to mean: glamour, comfort and a free hot meal. Then came the 1973 oil crisis. Fleet overcapacity and embedded cost structures conspired with the new reality of oil price-fixing by OPEC to turn Pan Am into a money pit. Corporate consolidations and capacity reductions ensued, but Pan Am never returned to solid profit growth.

And so it is with the banks.

Baha identifies several 'new reality' things for the banks: Housing ain't what it used to be, changing technology has rendered obsolete the massive network of retail outlets, the rates environment is poor, and regulators are all stepping on the necks of banks (even if Washington won't let any major banks fail).

Bottom line: The banking industry just isn't designed for the reality of this post-crisis world. They may nevr be.

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See Also:

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• Newt's False And Pandering Attack On Goldman Sachs

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