Tags: bank | stocks | leaning | loans

Banking Stocks Plunge Amid Sluggish Consumer Lending

word bank on cracked side wall concrete
(Dollar Photo Club)

By    |   Friday, 12 October 2018 08:02 AM

The stocks of major banks have been struggling most of the year and haven’t been keeping up with the past year’s overall stock-market gains amid a surprisingly tepid demand for loans.

Axios compared the KBW Bank Index total return to the S&P 500 from Dec. 29, 2017 until Oct. 11, 2018. For that period, the S&P 500 gained 5.7 percent while KBW plunged 4.3 percent.

There may be multiple reasons behind the bank weakness, but one expert pointed out two probable major factors: Increase competition for consumer loans paired with more cautious vetting by big banks before they just hand you a wad of cash.

Banks are facing probably the "largest threat" from non-bank loan originators ushc as Quicken Loans, Mark Doctoroff, who covers banks at MUFG Financial Institutions Group, told Axios.

Banks also have been “more disciplined and diligent about the quality of loan and origination,” Axios cited Doctoroff as explaining.

To be sure, bank shares could use a little help these days. They peaked back in February -- lifted by tax cuts, forecasts for faster economic growth, and deregulation -- and have under-performed the broader market since May as those factors faded, Bloomberg explained.

Analysts in recent weeks had hoped that banks gloomy mid-September trading updates and lighter lending expectations had set the bar low enough for a post-earnings rally.

Bernstein analyst John McDonald joined others looking for bank gains with earnings after recent underperformance.

“We’re expecting solid results,” he wrote. That followed KBW saying stock prices are even lower than what tempered expectations for quarterly profits would imply, which may mean that the group is poised to rally.

Earlier, Goldman said big-bank stocks were at an attractive entry point after underperforming, and as four of seven covered banks were due to beat estimates.

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The stocks of major banks have been struggling most of the year and haven’t been keeping up with the past year’s overall stock-market gains amid a surprisingly tepid demand for loans.
bank, stocks, leaning, loans
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2018-02-12
Friday, 12 October 2018 08:02 AM
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