More than 8.2 million First Horizon shares changed hands Monday compared to a trailing daily three-month average of 3.3 million shares. While some of the activity may have been an ongoing reaction to First Horizon's third quarter earnings report Friday, an expected $4 billion mortgage settlement for JPMorgan Chase (JPM - Get Report) with the Federal Housing Finance Authority clearly had an impact as well. The JPMorgan deal, widely leaked but not yet official, is part of an expected $13 billion JPMorgan settlement with the U.S. Justice Department.
First Horizon "may be the most exposed to a FHFA settlement before any litigation reserves are used," argued Wells Fargo analyst Matt Burnell in a research note published Monday. He expects a deal could reduce earnings by 44% in 2014.
Burnell wrote JPM's reported FHFA settlement payment "amounts to 12.1% of the loans sold to Fannie Mae (FNMA)and Freddie Mac (FMCC) before the crisis." This is similar to UBS's (UBS) ratio of 14%, Burnell stated.Burnell sees "relatively sizeable exposure," for Bank of America (BAC - Get Report) as well, with Morgan Stanley (MS - Get Report) and Goldman Sachs (GS - Get Report) facing more manageable (but still material levels) of risk. Several news reports have stated a Bank of America deal will cost the bank $6 billion. Bank of America shares fell 0.75% to $14.52 JPMorgan shares were down just .06% to $54.26, Morgan Stanley shares were down 0.88% to $29.43 and Goldman shares were up 0.68% to 159.77%. Trading volumes for all those big bank names were roughly average. The major indices U.S. stock market indicaes were essentially flat on the day. -- Written by Dan Freed in New York. Follow @dan_freed