Magazine article American Banker

Word from B of A Triggers Broad Bank Stock Decline

Magazine article American Banker

Word from B of A Triggers Broad Bank Stock Decline

Article excerpt

Bank stocks tumbled on Wednesday, snuffing an early rally after Bank of America Corp.'s afternoon announcement that its fourth-quarter earnings would fall well short of Wall Street estimates.

In a statement released ahead of an appearance by executives at an investor conference hosted by Goldman Sachs, the Charlotte, N.C., bank said it expects fourth-quarter earnings per diluted share to be between 85 and 90 cents. (See article on page 1.) According to First Call/Thomson Financial, Wall Street had expected B of A to earn $1.17 per share.

The American Banker index of the top 225 banks ended down 2.07%, while the index of the top 50 banks fell 1.72%. The Dow Jones industrial average was down 2.14%, and the Nasdaq composite index ended down 3.22%, reversing its morning gain of 0.59%.

Financial stocks closed down Wednesday, despite morning progress. Bank of America led the way, losing $3.1875, or 7.74%, to close at $38.

The B of A news spoiled gains that had been led by Chase Manhattan Corp., which won positive Wall Street reviews on Wednesday. Andrew B. Collins of ING Barings raised his rating for Chase to "buy" from "hold" Wednesday; he had downgraded it on Oct. 18.

Mr. Collins switched his rating back to "buy" on the possibility that the interest rate picture could soon improve -- citing Federal Reserve Chairman Alan Greenspan's hints to that effect on Tuesday. Interest rate cuts would benefit bank stocks with low credit risk financials such as Chase, Citigroup Inc., Bank of New York Co., and Wells Fargo & Co., he said in an interview.

He also pointed out that historically, financial stocks perform well during the 60 days before a Fed funds-rate cut, but cautioned that deteriorating commercial credit quality could keep some bank shares from participating in a rally. …

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