Financial Winners and Losers: JPMorgan

Financial stocks traded lower Wednesday along with the major U.S. indices, with JPMorgan Chase one of many weak spots.

Author:: Robert Holmes
Publish date:: Jun 3, 2009 4:16 PM EDT

Updated from 1:14 p.m. EDT

Financial stocks traded mostly lower Wednesday along with the major U.S. indices, with

JPMorgan Chase

(JPM) - Get Report

one of the many weak spots after a report that it was breaking up a hedge fund unit.

The Wall Street Journal

said

JPMorgan is shuttering an investment banking unit

that focuses on areas like hedge funds, leveraged buyouts and real estate. The report said most of the estimated 150 bankers within the group will be disbursed elsewhere in the bank.

JPMorgan will retain the group's Asian private-equity team, but effectively close operations in Europe and the U.S., the report added. JPMorgan shares gave up early gains and finished down 1.5% to $33.98.

Other bank stocks were in the red as well.

Citigroup

shares shed 3.4%,

Wells Fargo

(WFC) - Get Report

was lower by 1.1%, and

Bank of America

(BAC) - Get Report

slid 1.7%.

BofA's decline can be explained by a research note from Rochdale Securities analyst Dick Bove, who cut his 2009 and 2010 estimates for the bank to reflect the company's ongoing capital raising. Bove reduced his 2009 estimate to 71 cents a share from 74 cents, and he lowered the 2010 estimate to $1.38 a share from $1.79. Bove did, however, raise his 2011 estimate for BofA to $3.16 a share from $3.10.

"Since the capital raise was so quick, it is now assumed that the bank will step up its reserving in 2009," Bove said in the research note. "This will lower results this year but increase results, I believe in 2011 when reserve builds will drop off meaningfully."

Elsewhere,

BB&T

(BBT) - Get Report

was one of few winners after shares were upgraded at Keefe Bruyette & Woods to market perform from underperform after the bank's capital raise and dividend cut. Shares rose 0.6% to close at $21.65.

Barclays

(BCS) - Get Report

was among the worst financial performers, losing more than 7% after a

Financial Times

report that said

Temasek Holdings

sold its entire stake of nearly 2% in Barclays at the beginning of 2009 at a significant loss. The report comes a day after word an

Abu Dhabi investor sold 1.3 billion shares

of the bank. Shares fell 7.3% to close at $16.98.

Sallie Mae

(SLM) - Get Report

shares were also sliding after CEO Albert Lord told a conference Wednesday that while loan losses are expected to peak in 2009, charge-offs are likely to stay high. The stock was lower by 5.4% at $5.83.

Elsewhere,

American International Group

(AIG) - Get Report

lost ground after the troubled insurer said it has agreed to sell two buildings in New York City, including its headquarters. The price and buyer of the buildings were not disclosed. AIG declined 5.8% to end the day at $1.47.

In other financial news, the

Federal Reserve

said investor requests for loans to buy asset-backed securities increased to $11.5 billion in June from May's subscription total of $10.9 billion as investors become more comfortable with the program.

The Term Asset-Backed Securities Loan Facility, or TALF, for June was the first to be expanded to include newly issued commercial mortgage backed securities, or CMBS, as acceptable collateral. In a research note, KBW analyst Mark Pawlak said the TALF program now has its feet firmly beneath it as many of the initial fears have subsided.

"The program continues to see growth in both the size and the variety of assets submitted," Pawlak said in a research note. "We continue to believe TALF has gone a long way toward unfreezing the

asset-backed securities sector."