Sept 11 (Askume) – U.S. bank stocks fell on Wednesday in a bear market, extending a sell-off that began after officials warned that a slower-than-expected recovery and further rate cuts could hit interest income at investment banks.
JPMorgan Chase & Co (JPM.N) Chief Operating Officer Daniel Pinto said on Tuesday that forecasts for 2025 net interest income (NII) – the difference between a bank’s loan income and deposit payments – are too optimistic .
In premarket trading, JPMorgan Chase & Co fell 0.4%, Morgan Stanley (MS.N) dropped 1.2%, Citigroup (CN) fell 0.5% and Wells Fargo (WFC.N) fell 0.4%.
JPMorgan said: “Bank stocks suffered heavy losses given today’s regulatory capital news, which appears to be the opposite of what I expected. Or more likely, it is related to officials’ warnings about ongoing bank meetings and earnings/country information. Infrastructure forecasts are overly optimistic.”
The Fed is expected to cut key policy by at least 25 basis points at its meeting next week.
Higher interest rates have boosted banks’ loan income, but loose monetary policy will lead to lower-than-expected growth.
Morgan Stanley on Tuesday also forecast a modest decline in interest income in the third quarter , with President Dan Simchowitz saying mergers, acquisitions and initial public offering activity will remain below trend for the rest of the year.
Pinto expects trading revenue to remain stable or grow 2% this quarter, while Goldman Sachs Chief Executive David Solomon estimated in August that trading revenue could fall 10% due to the economic slowdown .
Citigroup Chief Financial Officer Mark Mason told investors at a conference in New York on Monday that markets revenue could fall 4%.
Meanwhile, Bank of America Corp (BAC.N) fell 0.6% in pre-market trading after Berkshire Hathaway (BRKa.N) disclosed another sale of shares in the second-largest bank.
Pessimism over the Federal Reserve’s revised plan to raise capital for big banks on Tuesday cut its target rate from 19% to 9%.
