This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Big Banks Dip Despite Rising Home Sales (Volcker Update)

Stocks in this article: BAC MS PNC

Updated from 4:23 p.m. ET with the ABA's decision to withdraw its request for a suspension of Volcker Rule regulations banning banks' investments in CDOs backed by trust preferred securities.

NEW YORK ( TheStreet) -- Many large-cap bank stocks pulled back on Monday, despite some good economic news.

PNC Financial Services Group  (PNC) led the sector down, with shares sliding 0.9% to close at $77.51. Bank of America  (BAC) was down 0.8% to close at $15.54 and Morgan Stanley  (MS) was down 0.7% to close at $30.85.

The broad indices ended mixed, with one more day to cap off the best year for the S&P 500 since 1997.  The index was down very slightly on Monday and has risen 29% this year, following a 13% gain during 2012.

The KBW Bank Index (I:BKX) on Monday pulled back 0.2% to 68.97, with the 24 index components split between winners and losers.  But the banks are looking at another banner year, with the index rising 34%, after a gain of 30% during 2012.

In economic news on Monday, the National Association of Realtors said pending sales of previously owned homes in the U.S.  rose 0.2% during November to a Home Sales Index reading of 102.1, from a downwardly revised reading of 101.5 for October. Pending sales during November were down 1.6% from a year earlier. Economists polled by Reuters on average estimated the November figure would rise by 1.5%.

While the pending home sales figure for November was disappointing to many economists, this was the first increase in six months. 

"Going forward, many industry insiders remain optimistic for robust activity in 2014 as the threat of rising rates has subsided with the Fed's reaffirmed commitment to keep rates low even after initiating the first step in the tapering process at the most recent December FOMC meeting. And, modest but positive improvement in the labor market gives hope that job creation will spur income growth and that in turn will spur continued demand and ability to finance home purchases," Sterne Agee chief economist Lindsey Pigza wrote in a note to clients Monday.

Volcker

Community bankers were waiting for the federal regulators response to a lawsuit filed last week by several community banks and the American Bankers Association, seeking to overturn the Volcker Rule's ban on on CDOs backed by trust preferred securities.  The regulators were directed by the court to respond to the industry's challenge by Monday.

The problem with the regulations to implement Volcker, which were finalized by federal bank regulators on Dec. 10, is that the apparent ban on the CDOs in question will cause dozens of community banks to book large fourth-quarter losses as the securities are moved from held-to-maturity to held-for-sale.

The bank regulators apparently hadn't considered the accounting requirements of the Securities and Exchanged Commission when they pointed out in a FAQ published Dec. 19 that the banks might be able to restructure the CDOs before July 2015, which is when they would be required to sell them.  Accounting rules require the banks immediately to move the securities to held-for-sale status and mark them to market, if there is any chance they may have to be sold.

The bank regulators and the SEC on Friday said they were reconsidering the Volcker regulations' requirement for the banks to part with the CDOs in question, and would come to a decision by Jan. 15.  They did not respond to the court complaint.

The FDIC early Monday sent a helpful letter to all U.S. banks, suggesting that "any actions [by the regulators] in January 2014 that occur before the issuance of December 31, 2013, financial reports... should be considered when preparing those financial reports."

The ABA responded to the regulators' new plan to review Volcker's CDO restrictions on Monday by dropping its court request for a temporary suspension of the portion of Volcker regulations banning the CDOs backed by trust preferred securities, according to a Bloomberg report.  The ABA and group of community banks did not withdraw their lawsuit against the regulators, however.


-- Written by Philip van Doorn in Jupiter, Fla.



>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs