This Day On The Street
Continue to site
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

Bank Stocks Sink Again, Led by First Niagara

NEW YORK (TheStreet) -- First Niagara Financial Group's (FNFG - Get Report) was again the loser among major U.S. banks on Monday, with shares sliding 3% to close at $8.81, adding to Friday's loss of nearly 12%.

At least two analysts downgraded First Niagara to neutral ratings after CEO Gary Crosby made a surprise announcement of a major four-year investment program to improve the company's technology and financial performance. First Niagara has more than quadrupled in size over the past five years through a string of acquisitions that have been dilutive to shareholders.

Please see Should You Wait for First Niagara to Get Its Act Together? for more on First Niagara's planned transformation, financial performance and prospects for the stock.

The broad market continued its decline, following international markets lower on continued concerns over a slowdown of emerging economies. The Dow Jones Industrial Average was down 0.26%, while the S&P 500 pulled back 0.49% and the NASDAQ Composite fell 1.1%.

Turkey's central bank said it would hold an emergency meeting on Tuesday, at which it could consider a significant hike in interest rates to defend its currency.

Despite the international market uncertainty over the past few trading sessions, the Federal Reserve is expected to continue tapering its monthly purchases of long-term bonds, following the meeting on Tuesday and Wednesday of the Federal Open Market Committee. The FOMC following its December meeting announced the central bank's bond purchases would be lowered to $75 billion a month from $85 billion.  Economists expect a further cut in monthly bond purchases to $65 billion.  The bond purchases have been meant to hold down long-term interest rates.  Long-term rates rose considerably during 2013 with the yield on 10-year U.S. Treasury bonds rising to 3.00% heading into the fed's initial tapering of "QE3" bond purchases, but then pulling back.  The market yield on the 10-year bond was up 5 basis points on Monday to 2.77%.

Stocks weren't helped by the latest housing numbers, as sales of new homes fell 7% during December from November, with the average sales price declining as well. New-home sales did rise considerably during 2013, and sales prices were up year-over-year.

The KBW Bank Index (I:BKX) was down 0.7%% to 67.94, with all 24 index components ending with losses, except for JPMorgan Chase, which was flat at $55.09.

Shares of Citigroup (C - Get Report) were down 1% to $48.81. With Argentina's currency declining 12% Thursday and Friday after the country decided on a devaluation to support exports, some investors were concerned about the bank's exposure. The extent of Citigroup's capital at risk in Argentina won't be known until the company files its annual report, probably early in March, however, the company previously reported that its "net investment in its Argentine operations was approximately $750 million," as of Sept. 30.

Citi also reported that as of Sept. 30 it had "cumulative translation losses related to its investment in Argentina, net of qualifying net investment hedges, of approximately $1.19 billion (pretax)."

KBW analyst Fred Cannon on Friday estimated that if Citi were to write down its entire investment in Argentina as of Sept. 30, it would see a "manageable" decline in book value of 17 cents a share, or 12 cents a share, if "foreign currency forwards" were factored in. But in a worst-case scenario, which could include $275 million in foreign exchange losses, Citi's book value could decline by 45 cents a share, Cannon wrote in a note to clients. A loss of that magnitude would represent less than 1% of Citi's reported Dec. 31 tangible book value of $55.38.

The following chart shows the performance of Citi's stock against the KBW Bank Index and the S&P 500 since the end of 2011:

C Chart data by YCharts

Mike Mayo: Jamie Dimon's Pay 'Feeds the Big Brother Banking Beast'

Should You Wait for First Niagara to Get Its Act Together?

 


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.

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
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
C $54.24 -1.33%
FNFG $8.85 -0.51%
AAPL $129.62 -2.20%
FB $79.34 -1.50%
GOOG $532.32 -1.44%

Markets

DOW 18,041.54 -190.48 -1.04%
S&P 500 2,104.20 -21.86 -1.03%
NASDAQ 5,032.7510 -56.6110 -1.11%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs