Bank Stocks Plunge Along With Oil Prices--Update
March 09 2020 - 7:28PM
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 15%, while JPMorgan Chase
& Co. dropped 14%.
Oil prices suffered their worst day since 1991 after Saudi
Arabia initiated a price war over the weekend. Brent crude, the
global gauge of oil prices, dropped 24% to $34.36 a barrel, and
U.S. crude futures fell 25% to $31.13 a barrel.
Sharply lower oil prices could make it harder for energy
companies to stay current on their loans. A rise 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 financial sector. Lower interest rates
crimp what banks can earn on loans.
What's more, a pessimistic outlook for economic growth due to
the spread of the coronavirus foreshadows tough times ahead for
banks, which tend to rise and fall with the economy. Investors wary
of a global recession piled into U.S. government bonds, pushing the
yield on the 10-year Treasury down to 0.501%. Yields move inversely
to bond prices.
The KBW Nasdaq Bank Index fell 14% Monday. It has lost more than
36% since stocks first began to fall on coronavirus fears two weeks
ago.
The KBW Nasdaq Regional Banking Index fell 15%. U.S. Bancorp,
the largest regional bank, fell 14% to $36.32. Birmingham,
Ala.-based Regions Financial Corp., which lends to energy companies
off the Gulf of Mexico, closed down more than 19%. Rate-sensitive
Comerica Inc. was down about 20%; roughly 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 19:13 ET (23:13 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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