With the market rate on 10-year U.S. Treasury bonds rising by 95 basis points since the end of April, Huntington -- an asset-sensitive bank -- had seen its shares rise by 9% over the previous two weeks through Tuesday's close.
In its first-quarter 10-Q filing, Huntington said that in a scenario of a parallel rise in market rate of 100 basis points, its interest income would increase by 37.1% over a one-year period, while its interest expense would increase by only 33.5%. But what we have actually seen over the past two months is a steepening of the yield curve, with long-term rates rising as short-term rates remaining very low, because the Federal Reserve continues to keep its target federal funds rate in a range of zero to 0.25%.
In an interview on Wednesday, KBW analyst Christopher Mutascio said the run-up in stocks of asset-sensitive banks was misguided.The broad indexes on Wednesday ended mixed, following a report from China that its exports during June had declined 3.1% from a year earlier, and the release of minutes from the most recent Federal Open Market Committee meeting, indicating the Federal Reserve could curtail its bond-buying as early as September. The KBW Bank Index (I:BKX) was down 1% to close at 63.93, with all but two of the 24 index components showing declines. One day after federal regulators proposed doubling a key capital requirement for the nation's largest banks, most analysts agreed that the higher supplementary Basel III Tier 1 leverage ratio requirement would do little to curtail banks' plans to deploy capital through dividend payouts and share buybacks. The nation's largest banks will kick off their second-quarter earnings season on Friday with JPMorgan Chase (JPM) and Well Fargo (WFC) set to announce their results before the market open. Analysts polled by Thomson Reuters estimate JPMorgan will post second-quarter earnings of $1.44 a share, declining from $1.59 in the first quarter, but increasing from $1.21 during the second quarter of 2012. For Wells Fargo, the consensus second-quarter EPS estimate is 93 cents, increasing from 92 cents the previous quarter and 82 cents a year earlier.
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