Bank Stocks Plunge Along With Oil Prices
March 09 2020 - 1:06PM
Dow Jones News
By Orla McCaffrey
Shares of global and U.S. banks plummeted Monday after a
collapse in oil prices sparked fears that financial institutions,
already struggling with falling interest rates, could be in for
trouble.
Shares of Bank of America Corp. fell 25% to $22 after the market
opened, while JPMorgan Chase & Co. dropped 21% to $95.39. They
recovered some ground after a brief trading halt sparked by a steep
decline in U.S. stocks. Midday, Bank of America and JPMorgan were
down about 13% and 12%, respectively.
Oil prices plunged to their lowest level since the 1991 Gulf War
after Saudi Arabia initiated a price war over the weekend. Brent
crude, a global barometer of oil prices, dropped 23% to $35.01 a
barrel, and U.S. crude futures fell 23% to $31.69 a barrel.
Sharply lower oil prices could make it harder for energy
companies to stay current on their loans. A spike in defaults would
be painful for banks with sizable portfolios of energy loans.
An emergency cut in interest rates last week also is keeping
investors away from the battered financial sector. Lower interest
rates crimp what banks can earn on loans.
What's more, a pessimistic outlook for growth due to the spread
of the coronavirus foreshadows tough times ahead for banks, which
tend to rise and fall with the economy. Investors worried about a
global recession piled into U.S. government bonds, pushing the
yield on the 10-year Treasury to 0.526%. Yields move inversely to
bond prices.
The KBW Nasdaq Bank Index of big banks fell more than 8% after
the market opened Monday. It has lost more than 30% since stocks
first began to fall on coronavirus fears two weeks ago.
The KBW Nasdaq Regional Banking Index fell 6.15% after the open.
U.S. Bancorp, the largest regional bank, fell 23% to $37.
Birmingham, Ala.-based Regions Financial Corp., which lends to
energy companies off the Gulf of Mexico, fell as much as 23%.
Rate-sensitive Comerica Inc. shed more than 27% to $40. About 7% of
the bank's commercial loans are energy-related.
Write to Orla McCaffrey at orla.mccaffrey@wsj.com
(END) Dow Jones Newswires
March 09, 2020 12:51 ET (16:51 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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