Is the market beyond shocked? Is it too optimistic? Or have the likely outcomes already been factored into the share price?

Part of the answer is in the emergency amputations that the banks are currently pursuing. Once upon a time, wealth management business was the answer to the banks’ woes: long-term growth provided by strong regulatory tailwinds (more of us putting increasing amounts of money into superannuation) that was largely uncorrelated - over the long-term, at least - to house prices, which remain the bedrock of bank credit growth, and hence profitability.

That was then.

The first shoe to drop was APRA’s decision that, in keeping with a global agreement to fortify the banking sector, Australia’s banks should be required to hold more dry powder in reserve, rather than lending it out.

The banks needed to find more capital. Sure, they could cut dividends, but no bank CEO who values his job wants to risk the ire of Australian shareholders by doing that. So it was time to sell the family jewels - something I’ve argued was akin to sacrificing tomorrow’s opportunities for a sugar hit today (can you say "climate change"?). A cynic might suggest that a bank CEO whose remuneration was tied to this year’s profits and share price could be persuaded to give up a lot of tomorrow for a little today. Only a cynic, though.

The second shoe, of course, is the royal commission. The tale of woe has been astounding, and, if the commission has anything to do with it, will have many more chapters before this particular book is finished.

Who’d be in wealth management? Well, who’d be a vertically integrated advice and funds management business with a complicated and convoluted remuneration structure and that has a - potentially - somewhat conflicted and opaque incentive structure?

Not the banks, that’s for sure. ANZ has already jettisoned one such ancillary business. CBA and NAB are either considering or in the process of selling theirs. And not before time.

Meanwhile, bank shares are down by around one-fifth from their high points of recent years.  Flattening capital-city house price growth hasn’t helped, of course, but the combination of damned if you do (the royal commission won’t be kind) and damned if you don’t (where’s the growth going to come from?) makes for a tough story for bank shares.

So, if you’re in the market for a large wealth management business, it may well be a buyer’s market. But be careful what you wish for - the business models are under threat, and - unless you do a good deal with the seller - there might well be liabilities stemming from the royal commission. And let’s face it: a buyer can likely set whatever conditions they want, because the banks want out, and as soon as possible.

Foolish takeaway

In the meantime, I still wouldn’t be buying bank shares, especially in the shadow of a royal commission that could meaningfully fine them as well as impose a change to how they do business. And house prices aren’t exactly growing like topsy.

Sure, banks shares look cheap, but then, so did AMP. Enough said.

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Scott Phillips is the Motley Fool’s general manager. You can follow Scott on Twitter. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).