Item 1/2 File Photo: People walk under the logo of a Citibank branch in the financial district in San Francisco, California, on July 17, 2009. REUTERS/Robert Galbraith/File Photo
(1/2) File photo: People walk under the logo of a Citibank branch in the Financial District in San Francisco, California, on July 17, 2009. REUTERS/Robert Galbraith/File Photo Buy License Rights, opens in a new tab
Aug 5 (Reuters) – U.S. bank stocks fell on Monday as concerns about a recession sent investors fleeing sectors closely tied to the health of the economy and into safe-haven assets.
The S&P 500 Bank Index (.SPXBK) Opens in a new tab, tracking a basket of large-cap bank stocks, closed 2.4% lower. Meanwhile, the KBW Regional Bank Index (.KRX) fell Open in new tab 2.8%. Citigroup (CN) ), Open in new tab, fell 3.4%, inflicting big losses on the bank. JPMorgan Chase (JPM.N), Opens in a new tab fell 2%, and Bank of America (BAC.N), Opens in new tab fell nearly 2.5%. Goldman Sachs (GS.N) new tab opens fell 2.5%.
Lenders are typically feeling the squeeze as recessions raise concerns about credit losses due to rising unemployment. Demand for loans, a key factor in profitability, has also been hit.
“Based on last week’s economic data, the economy could be slowing more than people realized,” said Jason Goldberg, a banking analyst at Barclays. That’s the biggest factor of all because it has an impact.”
Investors have been nervous since three major regional companies went bankrupt last year, amid a crisis of confidence in the sector due to rising interest rates and other factors.
Among local banks, Customer Bancorp’s (CUBI.N) Open New Tab shares fell nearly 4.4%, and Huntington Bancshares’ (HBAN.O) Open New Tab shares fell 3.4%.
Laurent Billard, banking analyst at Moody’s Corp., said: “This market volatility, combined with the potential for liquidity disruptions, could pose significant challenges for banks, particularly in managing funding and liquidity risk. There is a gender,” he said.
The U.S. unemployment rate rose to 4.3% in July, the highest level in nearly three years, on the back of a sharp slowdown in employment, with the labor market deteriorating and the economy potentially vulnerable to a recession. concerns have increased.
“Especially with interest rates this high and the weakness in the commercial real estate market, it’s very normal for credit losses to become the norm,” said Erika Najarian, an analyst at UBS.
“The job magazine is essentially just saying things aren’t as great as they used to be, not saying things are terrible.”
Economic weakness is likely to seep into the sector’s outlook after a mixed quarterly earnings season. Executives at major U.S. banks remain divided over the future direction of the Federal Reserve over interest rate cuts and worsening consumer health.
“This could be a sudden change of days. I don’t think anyone would call this the start of a multi-quarter downturn in the market or the economy,” said Stephen Biggar, a banking analyst at Argus Research.
Morgan Stanley analyst Manan Gosalia said in a note that a potential rate cut would be credit-positive for mid-sized banks by lowering funding costs and stimulating demand for loans.
The S&P 500 Bank Index is down 9.5% month-to-date, compared to a 6% decline in the benchmark S&P 500 (.SPX) Opens in a new tab. Open in new tab The KBW Regional Bank Index (.KRX) has declined by approximately 10% over the same period.
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Reporting by Manya Saini in Bangalore and Saeed Azhar in New York. Edited by: Sriraj Kalluvila and David Gregorio
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