Bank stocks drop faster than overall market

Bank stocks drop despite powerful start to earnings season for financial sector

Associated Press

BOSTON (AP) -- Financial stocks slipped Friday after two major U.S. banks opened the earnings season for the sector with huge profits.

Both Wells Fargo & Co. and JPMorgan Chase & Co. blew away profit expectations on Wall Street, though revenues fell a bit short of most projections.

There was also a broader sell-off by investors taking profits after the Dow Jones industrial average and the Standard & Poor's 500 plumbed new heights this week, and the Nasdaq touched 12-year highs.

Still, an index of major banks fell more than the broader market and there were some speed bumps for Wells Fargo, which posted a slowdown in mortgage lending. Its shares fell 2 percent.

Wells Fargo said its first-quarter profit surged 23 percent after it cut expenses. But revenue fell 2 percent, missing Wall Street forecast.

In a note to clients, Jefferies & Co. analyst Ken Usdin said Wells Fargo's credit outlook was improving. But he also noted the net interest income, or money earned from deposits and loans, "looks a little light" and added that mortgage banking volume was down compared with the fourth quarter. Usdin said that the bank's expenses came in a little higher than he had expected, despite the overall expenses decline of nearly 5 percent.

JPMorgan, the nation's biggest bank by assets, also saw first-quarter earnings soar, even as revenue fell slightly. Revenue and profit fell in its retail banking business, but increased in investment banking.

There were issues for smaller banks as well.

M&T Bank on Friday said it had to delay its merger with Hudson City Bancorp after the Federal Reserve flagged the bank's compliance with money-laundering rules. Its shares fell $3.97, or 3.8 percent, to $100.95 in morning trading. Hudson shares fell 5 percent.

The KBW bank index, made up of the 24 largest banks, slid 1.3 percent, about twice as big as the decline for the Standard & Poor's 500 index.

Shares of Wells Fargo fell 69 cents to $36.82 after trading as low as $36.60 earlier in the session. JPMorgan Chase slipped 11 cents to $49.20.

Elsewhere in the sector:

Bank of America Corp. fell 15 cents, or 1.2 percent, to $12.12.

Citigroup Inc. fell 46 cents, or 1 percent, to $44.41.

Goldman Sachs fell $1.48, or 1 percent, to $147.60.

Morgan Stanley fell 52 cents, or 2.3 percent, to $21.75.

U.S. Bancorp fell 24 cents, or 0.7 percent, to $33.95.

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