Banks Halt Stock Buybacks to Free Capital for Lending as Virus Crisis Deepens

The Financial Services Forum, whose members include Bank of America, Wells Fargo, Goldman Sachs and JPMorgan, are freezing stock buybacks to pump more capital into lending and other services.
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Some of the biggest banks in the U.S. and the world are halting stock buybacks to preserve capital for lending amid the escalating economic crisis triggered by the coronavirus.

The Financial Services Forum, whose members include Bank of America  (BAC) - Get Report, Wells Fargo  (WFC) - Get Report, Citigroup  (C) - Get Report, Goldman Sachs  (GS) - Get Report, JPMorgan JPM, State Street STT, and Bank of New York Mellon  (BK) - Get Report, said its members would pump the cash freed up by the share-buyback halt into small-business lending and other services.

The Covid "pandemic is an unprecedented challenge for the world and the global economy," the bank group said in a statement.

The Financial Services Forum stressed that its members "remain strong and well capitalized," having increased their capital by 40% over the past decade to $914 billion.

Still, despite a hefty bounce during Friday afternoon's stock market rally, bank stocks are a tough sell at the moment. Shares of the big banks are poised to take a hit today amid what is shaping up to be another tough day for the markets.

Citigroup at last check was poised to lead the way down, off 18% to $42.10 a share. Bank of America was down 15% to $20.44 and Wells Fargo slid 14% to $26.56.

Banks are extremely vulnerable to the coronavirus-driven economic turmoil, TheStreet's Jim Cramer has noted. He points out that lenders are on the hook with big loans to troubled sectors like the airlines and the cruise industry, which are taking it on the chin amid mounting travel restrictions and mass cancellations.

The Fed's decision to slash interest rates to effectively zero also pressures banks' bottom lines as well.