Magazine article American Banker

Bank Stocks Slide Again; Correction Underway?

Magazine article American Banker

Bank Stocks Slide Again; Correction Underway?

Article excerpt

NEW YORK - Bank shares fell for the second day in a row Friday, and money managers expect the slide to continue this week.

The selloff, coming in the wake of a string of strong earnings reports, is following a familiar pattern. For the past five quarters, bank stocks have run up in anticipation of strong profits and then given back some of the gain upon the actual announcements.

Analysts attributed the latest decline to profit taking, concerns about weak loan demand, and fears that the industry's unusually wide net interest margins are starting to shrink.

Bank Index Down Again

On Friday, the American Bankers Index of 225 bank stocks fell 1.4% following a 1.3% drop Thursday Shares of some banks, including First Union and Citicorp, plummeted between 5% and 11%. Meanwhile, the overall stock market rose 0.7% on Thursday and Friday.

Money managers believe bank shares haven't touched bottom.

"I think we are going to see a correction in the sector, but it will be less than 5%," said Sam A. Marchese, executive vice president at SIFE Trust Fund in Walnut Creek, Calif.

To be sure, the correction is not being fueled by disappointment in third-quarter profits, which started trickling out last week. "I was well above the consensus estimates for a lot of these banks, and they met my expectations," said J. Richard Fredericks, and analyst with Montgomery Securities.

The Shares of money center banks and superregionals fell the farthest last week, even among banks that had not yet reported earnings. …

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