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Last Trade - 25/09/20

Sector
Financials
Size
Large Cap
Market Cap £7.04bn
Enterprise Value £15.13bn
Revenue £3.67bn
Position in Universe 120th / 1041

No love for U.S. bank stocks as Treasury yield hits four-year high

Tue 24th April, 2018 10:13pm
April 24 (Reuters) - Shares in the biggest U.S. banks,
typically buoyed by rising interest rates, dipped Tuesday after
the benchmark U.S. Treasury yield topped 3 percent for the first
time in four years and some analysts worried about higher
interest rates slowing the economy.
    The S&P 500 bank sector  .SPXBK  closed down 0.2 percent or
roughly 10 percent below its Jan. 29 intraday high, which was
its highest level since Oct 2007. In comparison the S&P 500
closed down 1.3 percent for the day.
    JPMorgan Chase  JPM.N  was the biggest drag on the sector
with a 0.5 percent decline, followed by Bank of America  BAC.N ,
which fell 0.4 percent, and Citibank  C.N , down 0.5 percent.
Fifth Third Bancorp  FITB.O  rose 4 percent after its profit
beat expectations.  urn:newsml:reuters.com:*:nL3N1S14HA
    Bank stocks often trade higher on the prospect of rising
rates as higher interest rates tend to boost bank profits.
    The rise in the benchmark 10-year Treasury yield to its
highest in over four years reflected the durability of the U.S.
economic expansion, signaled Tuesday by stronger consumer
confidence and new home sales figures.  urn:newsml:reuters.com:*:nL1N1S11C1
    At least one analyst covering the sector said the modest
declines were just a reaction to the broader market decline.
    "Investors will get past it and realize fundamentals are
still improving and the banks' stock price outperformance will
be realized again," said Marty Mosby, analyst at stock
broker-dealer Vining Sparks, of Memphis, Tennessee. "Rates are
historically low and we haven't gotten to that tipping point
yet. The eventual down-draft or recession is a couple of years
away." 
    But Charles Peabody, a partner at research firm Portales
Partners LLC, in Chatham, New Jersey, said high rates could
dampen credit and take a toll on banks as soon as this year.
    "We've already seen an inflection point in the consumer
side," Peabody said. "We've not yet seen it in the corporate
side. That's what we're going to see in the second half of the
year."
    Peabody is watching for the point when corporate credit
quality starts to deteriorate.  
    "You're in a topping process for profits and stocks," he
said. "Markets are already discounting it."
    Peabody said a 2016 Bank of America forecast that a 100
basis point increase in interest rates could add $7 billion to
net interest income annually compares with a January 2018
forecast that a 100 basis point rise would add $3 billion. 
    "It's still positive but substantially less," he said.

 (Reporting By Sinead Carew; Editing by Scott Malone and Grant
McCool)
 ((sinead.carew@thomsonreuters.com; +1 (646) 223 6186; Reuters
Messaging: sinead.carew.thomsonreuters.com@reuters.net))
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