The major indexes are down just 0.6%, but the KRE and KBE are each lower by well over 2% in early action. This just in ... both of these banking indexes are off 10% this month.
The broader XLF is down 1.4% today, and 5.5% for the month.
Bank investors may be adjusting the odds of regulatory reform given the GOP's healthcare failure. There's also interest rates, and the curve continues to flatten with the 10-year yield down another six basis points to 2.36%.
Morgan Stanley is down 4% after Charles Peabody downgraded to Sell, citing a lofty valuation following a 60% Y/Y run higher.
Bank of America (BAC -2.4%), Goldman (GS -2.4%), Citigroup (C -0.9%), Regions (RF -2.5%), U.S. Bancorp (USB -1.7%), KeyCorp (KEY -2.2%), PNC Financial (PNC -2.1%), Fifth Third (FITB -2.4%), SunTrust (STI -2.5%), M&T (MTB -2.1%)
They're now mulling plans to work together to slash even more from back-office functions, with one effort being dubbed "Project Scalpel." The hope is that at least another $2B could be cut from expenses.
At work is a change in the way the financial world works. In the past, the ability to process trades, ownership transfers, dividend and interest payments were considered competitive advantages. Now those processes and systems are commoditized, meaning it may make more sense for the likes of BAC, C, WFC, GS, JPM, and MS to just join forces.
"We are going to start to execute on those contingency plans," Richard Gnodde, CEO of Goldman Sachs' (NYSE:GS) European operation tells CNBC.
U.K. PM Theresa May is expected to trigger her country's exit from the EU on March 29 - from there, it will be two years (or more) of negotiations before a divorce is final.
Most of Goldman's operations in Europe are in the U.K. with the bank employing about 6K there.
At issue for Goldman is whether Britain and the EU agree on transitional arrangements as they to put a Brexit deal together. Gnodde: "We can't bank on them so we have to have contingency plans and that's what are going to start to execute on."
"Group stink has never been more conspicuous than in financial sector stocks," says Doug Kass, calling the top in the piping hot names.
A strong economy, eased regulation, and higher interest rates have all been fully baked into valuations, says Kass, but being ignored: signs of a slowing economy, peaking auto sales, growing protectionism, and valuations at pre-crisis levels.
Then there's the housing market, and it's "reached an inflection point in price and activity," says Kass. He notes prices of higher-end West and East coast homes have turned lower - usually a bell-ringer for the residential housing cycle.
Favored shorts: MetLife (MET -1.1%), Lincoln Financial (LNC -2.9%), Goldman Sachs (GS -2%), Morgan Stanley (MS -2.7%). Others he's eyeing: Bank of America (BAC -4.4%), Citigroup (C -0.8%), JPMorgan (JPM -1.3%).
One name he's a fan of is Hartford Financial (HIG -0.5%).
The latest buy was this week, when Goldman won most of the loans at Fannie's latest sale - purchasing 8K mortgages with unpaid balances of $1.4B.
One reason behind the purchases: Goldman's $5.1B mortgage settlement with the U.S. last year includes $1.8B in "consumer relief" - i.e. forgiving or modifying loans for struggling homeowners. Trouble is, Goldman never originated many mortgages and it sold its servicing operation in 2011. If it wants to provide consumer relief, it needs a book of mortgages first.
Other buyers are doing a double-take at the amount Goldman is willing to pay at auction - between $0.50 and $0.90 on the dollar - but because the bank is getting credit towards its U.S. mortgage settlement, it can afford to pay more than other participants.
For now at least, few homeowners are getting a break from Goldman, which instead appears to be mostly foreclosing on the new loans. Those close to the situation say Goldman expects to ramp up modifications as it gets to the more recent Fannie loans.
"Gary was not the first person from Goldman Sachs (NYSE:GS) to join the government, and we hope and expect that he will not be the last," says Lloyd Blankfein in a letter leading off the bank's annual report. He speaks, of course, about former Goldman president, and now the U.S. president's chief economic adviser, Gary Cohn.
Noting criticism that Goldmanites move into the government as rent-seekers, Blankfein says the opposite is true. "Those in government bend over backward to avoid any perception of favoritism."
After all, the "dots" showed the Fed as being no more hawkish than a couple of meetings back when it surprised the world by predicting three rate hikes this year. Inflation and growth expectations were essentially unchanged as well.
So while the Fed may have been faster with a rate hike than many expected just a couple of weeks back, it appears the timetable past today remains the same.
For now, Washington D.C. is winning the battle against those in favor of quickly rolling back swaths of Dodd-Frank. For now, the Senate Banking Committee and House Financial Services Committee are working on other things, while Republicans instead spend political capital on things like Obamacare repeal and tax reform.
Barney Frank is taking a victory lap, telling Bloomberg nothing substantial will get through Congress. He does expect the possibility of relief for smaller banks, but the likes of JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS) and others probably shouldn't be holding their breath for big changes.
KBW's Brian Gardner: “Changes to the Dodd-Frank Act are second-tier agenda items and are unlikely to pass Congress in the near term ... Improvement in the regulatory regime is likely to be subtle and not seen by the public."
Shops like LendingClub (NYSE:LC) and OnDeck Capital (NYSE:ONDK) no doubt face challenges, but Sandler O'Neill's Chris Donat says traditional lenders - particularly credit cards - are threatened by the fintech business model.
Donat takes note of big attendance at the conference (6K) as a sign of optimism about the industry, and recent loan purchase agreements from not-yet-public players like Prosper and SoFi augurs well.
Also presenting at the conference was Goldman Sachs (NYSE:GS), and its new Marcus platform was described (by Goldman) as a fintech startup with a 147 year-old balance sheet. This is a threat to credit cards as well, says Donat.
LendingClub today is higher by 6.6%, ONDK by 2.6%.
Goldman's (NYSE:GS) stock is up 40% since the election, another wave of alumni is running the country, and animal spirits are being unleashed in trading and M&A.
Special bonuses for all? Not exactly. Instead a company-wide memo this week announced a new more stringent policy on reimbursement for mobile phone usage.
This could be penny-wise, pound-foolish, suggests Lex, what with bankers already leaving for better-paying jobs at boutiques, hedge funds, and P-E. Then there's the lure of Silicon Valley, where being stingy with tech gadgets would be unheard of.
Truth is, while the stock price may be soaring, earnings estimates aren't. ROE last year was just 9.4%, and is seen at just 10.2% this year, and only reaching 10.5% in 2019. Revenues are forecast to rise just 7% over the next two years.
"Either the Trump-led rally is a mistake, or brokers’ forecasts are too gloomy. If the latter, Goldman can afford new phones."
In total, the underwriters will split about $85M in fees, or 2.5% of the $3.4B raised. Goldman (NYSE:GS) in next in line in payouts, with $21M.
It's more than just those dollars. There's bragging rights (and maybe the next deal) to be had for pulling off a successful high-profile IPO amid what's been a tough market for offerings. Snap had wanted to sell shares for between $14 and $16, but they priced at $17, opened at $24, and closed today at $24.48.
Also getting a taste (in descending order) are JPMorgan (NYSE:JPM), Deutsche Bank (NYSE:DB), and Barclays (NYSE:BCS).
Banks globally have paid $321B in fines since 2008 for an abundance of regulatory failings from money laundering to market manipulation and terrorist financing, according to data compiled by Boston Consulting Group.
That tally is set to increase in the coming years as European and Asian regulators catch up with their more aggressive U.S. peers, who have levied the majority of charges to date.
Overnight comments from two influential Fed voices suggested the market was way underpricing the odds of a March rate hike. Not anymore, as rate hike odds have jumped to more than 75% in busy morning trade.
Cheering the action the most are the banks. BAC +2.75%, JPM +2.1%, C +2.3%, GS +2.2%, MS +2.5%, USB +1.8%, XLF +1.9%, KBE +1.9%, KRE +2.25% premarket
It's getting that stake from a number of sellers including Goldman Sachs (NYSE:GS) and private-equity firm MBK Partners. That sets an enterprise value for the operation at $7.4B.
The move should tighten alignment on strategy for the Universal parks as they increasingly open attractions and lands based on blockbuster properties.
The company plans Super Nintendo World to open at the Japan park in time for the 2020 Tokyo Olympics, and later this year will see Minion Park (the world's largest themed area built on hit animated film Minions).