Banks Take Multiple Paths to Financial Health
A look at the implied volatility of 19 large financial insitutions.
The chart below sorts the financial institutions from left to right according to their 52-week implied volatility highs, with General Motors (GMGMQ) omitted. While not captured in the graphic, I find it interesting that the two institutions whose current IV is the lowest compared to the high IV are Morgan Stanley (MS) at 12.7% of the 52-week high and Goldman Sachs (GS) at 18.9% of the 52-week high. Those institutions whose current IV is closest to the 52-week high (in percentage terms) are BB&T (BBT) at 36.3% and Regions Financial (RF) at 34.6%.
Click to enlarge
So, going solely on the percentage retracement from implied volatility highs, it appears as if the investment banks are healthiest and have shed the most risk, while regional banks have undergone a much more measured healing process -- about what one might expect. Clearly this is a story of multiple different pathways back to financial health.
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