Optimistic Analyst Calls Are Not Stopping Bank Stocks From Bleeding

Bank stocks are on a five-day losing streak, even after Deutsche Bank said they’re probably oversold, and Wells Fargo analyst Mike Mayo boosted his recommendation on Morgan Stanley.

The KBW Bank Index has stumbled as much as 2.3 percent today, reaching a 13-month intraday low. That might be too low, Deutsche Bank’s Matt O’Connor writes, as “slower revenue growth seems priced in, we don’t expect a recession over the next six months, and valuations are well below historical levels.” Deutsche Bank favors brokers Goldman Sachs Group Inc. and Morgan Stanley, along with several regional banks, including Citizens Financial Group Inc. and PNC Financial Services Group.

O’Connor views the KBW Bank Index sell-off of about 18 percent since its Feb. 1 high in two stages, with the decline through Sept. 20 driven by revenue growth concerns, tepid loan growth, pressured fees and mixed capital markets revenues. He also flagged concern net interest margins may be peaking soon as “deposit volumes/betas become a headwind.”

Source: Bloomberg Finance L.P.

Chart: Used with permission from Bloomberg Finance L.P.

Read more:

• US – Iran – Iraq tension remain the main driver of the stock market today
• How top market players on Wall St think 2020 will look like on financial markets
• Money Flow before the start of the new trading week
• Cincinnati Financial Corporation (CINF.US) -Opportunity for long positions
• Asia stocks gain as Fed signals no rate cuts in 2020