This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Get Ready for the Year-End Bank Stock Apocalypse

Updated with information on the $1 billion lawsuit brought by the Department of Justice against Bank of America.

NEW YORK ( TheStreet) -- Investors better get set for an especially lousy fourth quarter for bank stocks.

FBR analyst Paul Miller says that "the loan pipelines are strong," as commercial borrowers are arranging "credit lines but they are not borrowing the money," as they wait to see what happens in the November elections, and with the "fiscal cliff."

The fiscal cliff refers to the year-end expiration of the income tax cuts -- including the 15% maximum tax rate on qualified dividends -- signed into law by President George W. Bush and extended by President Obama in 2010, as part of the compromise with Congress to raise federal debt ceiling limit. The 2010 compromise also requires large federal budget cuts beginning in 2013, unless Congress acts.

"The Democrats and Republicans cannot get together until very late in the quarter on the fiscal cliff," Miller says, adding that "we think lending in general will dry up in the fourth quarter. Most companies have said that it started drying up in mid-September."

So investors are anticipating a slow-down of commercial and industrial (C&I) lending, which has been a very important growth story for large regional banks over the past year.

"It's going to get dark, dreary, cold and damp, as the Republicans and Democrats have it out," leading into the elections, Miller says.

"We believe that at some point there will be a compromise" on the fiscal cliff, Miller says, but "the deeper we go into this year and if it crosses January 1, the worse it will be for the perception of the world, and for bank stocks."

"Once there is a compromise, business will start to draw down their credit lines and you will get a bounce back for lending in the first quarter."

Looking broadly at third-quarter earnings results, FactSet says that out of 123 companies among the S&P 500 (SPX.X) that have reported so far, 67% have beaten consensus earnings estimates, while only 38% have reported sales above estimates. FactSet says that "this percentage is well below the average of 55% recorded over the past four quarters. In fact, it is the lowest percentage of companies to report sales above estimates at this stage of the earnings season since Q1 2009 (35%)."
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $15.69 0.00%
C $51.06 0.00%
JPM $62.05 0.00%
RF $9.09 0.00%
WFC $52.03 0.00%


Chart of I:DJI
DOW 16,790.19 +13.76 0.08%
S&P 500 1,979.92 -7.13 -0.36%
NASDAQ 4,748.3610 -32.9030 -0.69%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs