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March 09, 2020 at 11:40 AM
Plummeting oil prices will crush bank stocks already facing weak lending, margin pressures, higher loan losses and product price deflation, according to Odeon Capital analyst Dick Bove.
“A sharp decline in oil prices will be a body blow to an industry already at high risk,” Bove said in a note. He advised investors avoid the group as all major banks, including Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co., are large lenders to companies with ties to the energy sector and now face a “big problem.”
He also flagged regional banks U.S. Bancorp, PNC Financial Services Group Inc., Comerica Inc., KeyCorp and Regions Financial Corp. Three Canadian banks, Royal Bank of Canada, Toronto-Dominion Bank and Bank of Montreal may also be at risk, he said.
Bank shares kept collapsing in early trading as Treasury yields touched new lows, with oil shock fears compounding concern about the spreading coronavirus.
The KBW Bank Index fell as much as 10.9%, the most since August 2011. BofA and Citigroup plunged more than 15%, also the most since 2011, while JPMorgan fell 13%, the most since 2015. Wells Fargo, which faces a series of congressional hearings this week, slid 11%; earlier Monday, Betsy Duke stepped down as Wells Fargo’s chair. Morgan Stanley shed 12% and Goldman Sachs Group Inc. tumbled 11%.
