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) 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) as well, with Morgan Stanley (MS) and Goldman Sachs (GS) 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
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