Bank stocks article updated with Regions results, additional information.
NEW YORK (
) -- International and domestic forces -- as well as significant earnings announcements -- are likely to move bank stocks today.
In the U.S.,
reported results Tuesday morning, posting a quarterly loss from continuing operations of 11 cents compared to a profit of 1 cent a year ago, due to a one-time charge from the sale of its brokerage unit. Excluding the goodwill impairment charge, earnings from continuing operations was 9 cents per share, in line with earlier guidance and slightly ahead of expectations.
The bank already pre-announced on Jan 11 that it expected to report a net loss from continuing operations is expected to be 8 cents to 16 cents per share. Excluding the goodwill impairment charge it expects to incur following its sale of its Morgan Keegan unit, the bank said it expects to earn 7 cents to 9 cents.
Analysts expected the bank to earn 7 cents according to consensus estimates from
Zacks Investment Research
Shares were down 1.4% in premarket trading, tracking weakness in other financial stocks.
The focus for investors will however be on the management commentary during the conference call.
Regions is yet to repay $3.5 billion in government bailout money and analysts see a debt and equity raise as inevitable, given its low capital ratios. The bank has a Tier 1 Capital ratio of 8.16% as of the third quarter, the lowest among its peers. The Morgan Keegan deal may take that ratio up to 8.25% according to analysts at Barclays Capital.
Investors are also concerned whether the bank will be able to pass the Fed's stress test, which requires banks to show that they can maintain a Tier 1 Capital ratio of 5% even amid an extremely harsh recession.
Banks and state officials could reach a
mortgage settlement over deceptive foreclosure practices after year-long negotiations in a matter of weeks, according to press reports, a factor that has been fueling buying in big bank stocks.
That rally could build on expectations that President Obama may refer to the settlement in his State of the Union Address or announce policies that seek to address the problems in the housing market.
Earlier this month, speculation that the Obama administration will announce a
massive refinancing program led to a surge in stocks, only to be later denied by the White House.
Reports that a plan to
convert foreclosed homes owned by Fannie Mae and Freddie Mac to rentals will be announced shortly have also surfaced, which could give a potential lift to home prices and by extension bank stocks.
"The President, as you know, is focused on the issue of housing," White House press secretary Jay Carney told reporters on Monday in a briefing. "This has been -- had a profound impact on our economy, and the President has worked since he took office to help alleviate the damage that the bursting of the housing bubble has caused to our economy and to help homeowners refinance their homes, for example, or get forbearance in order to stay in their homes."
However, he did not say the President will specifically address the mortgage settlement in his State of the Union address.
Iowa State Attorney General has said the agreement is unlikely to be reached this week. Press reports continue to point to opposition to the terms of the settlement from states such as California and New York and Delaware has become the latest state to drop out from the talks.
Bank of America
are the big mortgage servicers who may have to pay upto $25 billion towards the settlement.
are some of the regional banks who may participate in the proposed settlement, according to reports.
In Europe, talks with Greece over its outstanding debt have hit an impasse, with officials demanding even further haircuts which private investors resisting.
At a meeting of European finance ministers in Brussels on Monday, political leaders refused to put up more public money for Greece and held firm at a previous offer of 130 billion euros ($170 billion) for a second aid package, according to
Finance ministers are also calling on bondholders to provide greater debt relief, including having investors accept a bond swap that would offer yields below 4% on existing Greek debt that currently pays in the double digits.
If a deal is not reached soon, Greece could miss a March coupon payment on $19 billion in maturing bonds. That would threaten a "disorderly default" that would trigger credit default swaps tied to Greek debt.
European bank stocks were already feeling the pain, including
BNP Paribas SA
down 2.5% and
Societe Generale SA
trading down over 7% on European exchanges.
--Written by Shanthi Bharatwaj in New York
>To contact the writer of this article, click here:
>To follow the writer on Twitter, go to
>To submit a news tip, send an email to:
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.