Financial stocks slip in Q3 as rates rise; quarter's winners have their own stories

Oct. 01, 2022 10:22 AM ETSilvergate Capital Corporation (SI), FINX, KIE, KBE, QFIN, AVAL, FUTU, CS, LU, PYPL, BMA, ATCO, PLMRITUBBy: Liz Kiesche, SA News Editor6 Comments

Overall, financial stocks slipped in Q3 2022 as climbing interest rates and geopolitical events such as the Ukraine war and the U.K. government budget proposal fueled continuing volatility in equity and bond markets.

For banks, higher interest rates bolster their net interest margins, but lead to lower activity in mergers & acquisitions and equity and debt offerings. So rising rates are a double-edged sword for the megabanks with big investment banking and capital markets businesses. And the increase of mortgage rates from historic lows has weighed on that business, as well.

The SPDR S&P Bank ETF (NYSEARCA:KBE) eked out a 0.9% gain for the quarter. The SPDR S&P Insurance ETF (NYSEARCA:KIE) fell 4.4% as investment performance at many firms flagged as asset prices languished. Fintech names also weakened as many saw user growth slowing during the quarter. Global X FinTech Thematic ETF (NASDAQ:FINX) dropped 4.7% during the quarter.

Of course, many of the quarter's losers are gainers moved on specific catalysts. Among financial stocks with a market cap over $2B, Silvergate Capital (NYSE:SI) rose the most, gaining 42%. It hit its 52-week low of $50.67 near the beginning of the quarter, but got help from better-than-expected Q2 results and a couple of favorable analyst reports. BTIG initiated coverage of the crypto bank with a Buy in August.

The stock of Atco Corp. (NYSE:ATCO), an asset manager and operator of container ships, jumped 29%, after receiving a takeover bid from group that includes its chairman. The offer was sweetened toward the end of the quarter.

Palomar Holdings (NASDAQ:PLMR), a specialty property insurance company, saw its stock rise 29%, making it the third biggest climber.

Argentinian bank Banco Macro (NYSE:BMA) rose 23% as the Argentinian peso fell 15% against the U.S. dollar.

Brazilian bank Itaú Unibanco Holding (ITUB), also gained 23% in the quarter that it agreed to acquire control of Avenue Holding Cayman, a U.S. digital securities broker that's aiming to give Brazilian investors access to the international market.

Of the five biggest decliners, three are Chinese fintechs, which are still threatened with a potential delisting from U.S. stock markets even after a preliminary agreement was reached with U.S. authorities.

Shanghai-based personal finance platform Lufax Holdings (NYSE:LU) tumbled the most, 59%, during the quarter.

Credit Suisse (NYSE:CS), the Zurich-based bank, dropped 31% after reports the company might be considering a capital raise. The bank was also said to be weighing a plan to split its investment bank into three units.

Colombian financial services company Grupo Aval Acciones y Valores (NYSE:AVAL) sank 30%.

Hong Kong-based online brokerage Futu Holdings (NASDAQ:FUTU) slid 29%.

And Shanghai-based fintech platform 360 DigiTech (NASDAQ:QFIN) fell 26%.

In late August, China's securities regulator and U.S. authorities came to a preliminary agreement on auditing U.S.-listed Chinese companies.

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