Bank Stocks Plunge Along With Oil Prices - The Wall Street Journal

Bank of America was among the lenders whose shares were sliding.

Photo: brian snyder/Reuters

By

Orla McCaffrey

Orla McCaffrey
The Wall Street Journal
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Updated March 9, 2020 5:04 pm ET

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 15.3% to $22 after the market opened, while JPMorgan Chase & Co. dropped 11.7% to $95.39. Midday, Bank of America and JPMorgan were down about 12% and 11%, respectively.

Oil prices suffered their worst day since 1991 after Saudi Arabia initiated a price war over the weekend. Brent crude, a global barometer of oil prices, dropped 23% to $35.01 a barrel, and U.S. crude futures fell 23% to $31.69 a barrel.

Sharply lower oil prices could make it harder for energy companies to stay current on their loans. A spike 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 battered financial sector. Lower interest rates crimp what banks can earn on loans.

What’s more, a pessimistic outlook for growth due to the spread of the coronavirus foreshadows tough times ahead for banks, which tend to rise and fall with the economy. Investors worried about a global recession piled into U.S. government bonds, pushing the yield on the 10-year Treasury to 0.526%. Yields move inversely to bond prices.

The KBW Nasdaq Bank Index of big banks fell more than 8% after the market opened Monday. It has lost more than 30% since stocks first began to fall on coronavirus fears two weeks ago.

The KBW Nasdaq Regional Banking Index fell 6.15% after the open. U.S. Bancorp, the largest regional bank, fell about 12.7% to $37. Birmingham, Ala.-based Regions Financial Corp., which lends to energy companies off the Gulf of Mexico, fell as much as 16.5%. Rate-sensitive Comerica Inc. was down about 11%. About 7% of the bank’s commercial loans are energy-related

Write to Orla McCaffrey at orla.mccaffrey@wsj.com

Corrections & Amplifications
An earlier version of this article contained incorrect percentage changes for a number of the banks mentioned. Shortly after the market opened, Bank of America stock was down 15.3%; JPMorgan was down 11.7%; U.S. Bancorp was down 12.7%; Regions Financial was down as much as 16.5%, and Comerica was down about 11%. The earlier version incorrectly said 25%, 21%, 23%, 23% and 27%, respectively. Also, the earlier version incorrectly said that Bank of America and JPMorgan shares recovered ground intraday. Also, oil prices suffered their worst day since 1991. The earlier version incorrectly said oil prices fell to their lowest level since the 1991 Gulf War. (March 9)

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