Bank Stocks Defy Slew of Negative Reports

Bank of America did not see its valuation range reduced by Wells Fargo analyst Matt Burnell. A previous version of this story incorrectly stated that it was reduced.

NEW YORK (TheStreet) -- Shares of the largest U.S. banks were mixed early Tuesday despite a quartet of negative analyst reports.

The European crisis and tougher regulations were common themes in reports from equity analysts at Wells Fargo, Bank of America Merrill Lynch and JPMorgan, while credit analysts at Moody's Investors Service chimed in with concerns about higher mortgage-related costs.

Morgan Stanley shares are down nearly 11% year to date, making it the worst performer among giant U.S. securities dealers.

Wells Fargo analyst Matt Burnell reduced his "valuation ranges" for Goldman Sachs (GS), Morgan Stanley (MS), Citigroup (C) and JPMorgan Chase (JPM), arguing that "mounting macroeconomic and geopolitical concerns and [the] perceived 'uninvestibility'" of the group has been driving higher volatility in the stocks versus their regional banking peers. He did not lower his range for Bank of America (BAC), however.

Bank of America Merrill Lynch analyst Guy Moszkowski lowered second quarter estimates for the same group [excluding Bank of America, which does not cover itself] citing anticipated weaker trading and investment banking performance as well as "macro uncertainty," and "more 'hawkish' regulatory rhetoric."

At JPMorgan, analyst Kian Abouhossein, who follows global investment banks, lowered his return on equity projections to 7% from 6.6% arguing new rules aimed at reducing risk in the $468 trillion "over-the-counter" derivatives market could negatively impact those numbers, despite what he says are "consensus views" and "management guidance" to the contrary. Abouhossein also contends the rules will not succeed in reducing systemic risk.

As for Moody's, analysts argued Government Sponsored Enterprises (GSEs) Fannie Mae (FNMA.OB)Freddie Mac (FMCC.OB) have become more aggressive in pushing banks to buy back problem mortgage bonds sold during the crisis "which will lead to higher repurchase-related losses for mortgage originators."

Moody's called the change by the GSEs "credit negative" for mortgage originators, citing Bank of America, JPMorgan, Citigroup, Wells Fargo (WFC), PHH Corporation (PHH), SunTrust Banks (STI). Moody's put 17 global banks on review for downgrade earlier this year and has already downgraded two.

Shares of big banks were mixed in early trading Tuesday, with JPMorgan, Goldman Sachs and Morgan Stanley lower a few minutes after the open, while Bank of America, Citigroup and Wells Fargo were all higher.

-- Written by Dan Freed in New York.

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