Abigail with attitude: Deutsche and Morgan Stanley’s earnings challenge

For several years now, the regulators have been the bugbear of the big banks. Once the world stabilized, the regulators started to crack the whip on numerous issues such as pay, capital ratios and proprietary trading. In 2013, a new ogre emerged in the form of litigation risk. This is making big inroads into banks’ profitability and it is difficult to be sure when and where such contingent liabilities will end. Bank investors should beware.