Sector Analysis: BankingThe banking sector has been subject to increasing pessimism in recent times due to rising short- and long-term interest rates. The market capitalization of the banking sector suffered a substantial decline. Most investors question whether the industry can sustain continued profitability as a result of these factors. In recent years, banks have responded to these problems by diversifying away from interest rate-sensitive products and services. But interest rates are the fundamental aspect of any financial service. Therefore, I believe the financial services sector will be profoundly affected by rising interest rates. Over the past two years, banks have experienced good economic factors. Interest rates were low, credit quality was good, and inflation was low. These factors are generally predictive of the types of earnings banks should report. But the good times cannot continue as interest rate increases cause a reduction in lending activity, a deterioration in credit quality and a reduction in the value of bond portfolios. Porter's Five Forces Analysis:1. Rivalry between competing vendors: The banking industry continues to restructure and position itself for our changing economy, as a result many mega-mergers have occurred in recent years. Citicorp and Travelers Insurance agreed to merge in April 1998 at a value of $70 billion. Shortly thereafter, Bank of America and Nation's Bank also decided to merge, becoming the largest bank in the United States. Banking merger...