<p>Things went from bad to worse for bank stocks this week despite a historic stimulus effort from the Federal Reserve on Sunday night. The shares opened the border on Monday after futures collapsed due to ongoing concerns about the effect COVID-19 will have on the economy and thus the financial markets.
The Dow Jones Industrial Average may be in the green so far today, but that led to the fact that it was making a major dive towards the 20,000 level, with bank shares among the hardest hit.
Not only are Wall Street banks vulnerable to the Fed’s cut in interest rates – affecting net interest margins – but they are facing a number of related headwinds, including corporate debt downgrades, market volatility and tight repo market conditions.
Here are four to sell now:
Bank of America (BAC)
Although it bounced back today, Bank of America (NYSE: BAC) shares fell nearly 18% yesterday, marking a decline of more than 40% from their most recent high to return to levels not seen since the end of 2016. The company was in the headlines recently after a branch on Park Avenue in New York City ran out of $ 100 bills when wealthy customers made large withdrawals.
The company, like many other large banks, reported solid results as early as January (which feels like a generation ago). Revenue of 74 cents beat estimates by five cents of $ 22.3 billion in revenue. Keep an eye out for the net depreciation rate will increase in the future from only 0.39% when loans become acidic in this difficult economic environment.
JPMorgan Chase (JPM)
JPMorgan Chase (NYSE: JPM) shares have fallen nearly 11.5% over the past five days and returned to mid-2017 as prices fall further away from their 200-day moving average. The decline breaks towards the end of 2018 and puts an end to a three-year trading pattern.
Not only are investors dealing with a lot of macroeconomic issues, but CEO Jamie Dimon is offline and recovering from acute heart surgery earlier this month.
Dimon has been a very loud and visible representative of Wall Street in Washington and elsewhere in recent years. His absence does not help the trust. He can also help explain to decision makers why various lending markets remain broken – threatening liquidity in the basic pipeline system of the financial system.
Wells Fargo (WFC)
Wells Fargo (NYSE: WFC) shares have decreased by almost 49% compared to the previous year and return to the lowest levels not seen since the end of 2012. The company is among the more exposed large banks given the recent problems with sales force tactics and what which is generally seen as a weaker loan portfolio. The company even had a reported case of coronavirus in one of its San Francisco offices.
The meltdown comes after a series of analytics upgrades from Atlantic Equities and CFRA in recent weeks, as well as bullish comments from no less than Warren Buffett on CNBC that bank stocks were “very attractive” relative to other securities he sees.
When the company last reported results in mid-January, management admitted that costs were too high, revenue growth too low and that margins were likely to continue to decline in 2020.
Goldman Sachs (GS)
Shares in Goldman Sachs (NYSE: GS) decreased by 33% compared to the previous year. Watch out for a possible decline to the lowest levels last seen in 2016 near $ 130, which would be worth a loss of about 20% from here.
The company last reported January 14 with earnings of $ 4.69 per share, increasing revenue by 23.2%. The bank was in the news yesterday to warn customers that shares could fall another 20%, after recently falling into a bear market as the coronavirus causes “unsurpassed economic and societal disruption.”
At the time of writing, William Roth had no position in any of the above securities.