U.S. bank stocks fall broadly after equity fund manager defaults

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The front facade of the New York Stock Exchange (NYSE) is on view in New York, United States, March 29, 2021. REUTERS / Brendan McDermid

(Reuters) – U.S. bank stocks fell widely on Monday following news of losses at some global investment banks after a fund failed, even knocking down stocks of domestic lenders typically withdrawn from stock markets.

The KBW Nasdaq Bank stock index fell 3.4% before cutting losses to 2% by mid-afternoon. Shares of major U.S. banks and even regional banks, such as Truist Financial and PNC Financial Services Group, fell after Nomura Holdings Inc and Credit Suisse Group AG warned of billions of dollars in potential losses after a fund, named by sources Archegos, has defaulted on margin calls.

“It’s a perfect excuse for any investor to take a profit in financials,” said Christopher Marinac, director of research at Janney Montgomery Scott. “Bank stocks have done very well this quarter.”

“The real question is whether this becomes a larger systemic incident that lasts for several weeks,” he said.

The KBW index had gained 24% this year until Friday.

Bank stocks benefited greatly from the rise in bond yields, which could increase net interest income. The roll-out of vaccinations and government stimulus programs have also fueled optimism about loan growth and lower-than-expected losses on bad debts.

Several days this year, bank stocks have risen or fallen along with the yield on 10-year US Treasuries, Marinac said.

Late Monday morning, bank stocks began to recover from their initial lows after the 10-year yield rose to 1.70% from 1.66% on Friday.

Report by David Henry in New York; Editing by Richard Chang

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