Updated with Wells downgrade, reports on U.S. pay czar limiting pay for bank executives and closing stock prices
NEW YORK (
was among the losers of the financial sector Wednesday after it was hit by a downgrade by a prominent analyst and reports surfaced about the U.S. government's plans to curb pay for top executives at some of its competitors.
Rochdale Securities analyst Richard Bove lowered his rating for Wells to sell Thursday afternoon, accelerating milder losses for the bank earlier in the day, after reporting a profit that beat Wall Street's consensus estimate. The stock closed down 5.1% to $28.90.
Also weighing on shares of some banks may have been reports that Obama administration pay czar
planned to cap compensation for top executives at bailed-out banks like
Bank of America
American International Group
. The battered companies, along with automakers General Motors and Chrysler, were forced to go back to the government for second and sometimes third helpings of assistance.
Bank of America shares closed down 2.9% to $16.51. Citigroup shares shed a penny to $4.42 and AIG's stock took a 3.5% hit to $39.03.
, which has repaid its TARP investment, lost 3% to $44.65.
Before the opening bell,
the San Francisco-based bank
reported a third-quarter profit of $3.24 billion, or 56 cents a share, coming in well ahead of the Thomson Reuters average estimate of 37 cents a share.
Wells Fargo said its current projections show credit losses peaking in 2010, with consumer losses potentially peaking in first half of the year and gradually declining, absent further economic deterioration. Its third quarter net charge-offs swelled, however, reaching $5.1 billion in the latest quarter, compared with second quarter net charge-offs of $4.4 billion.
However, Wells Fargo may have disappointed those who expected the bank to make some sort of statement about paying back bailout funds from the Troubled Asset Relief Program.
also reported its third-quarter results early Wednesday. The bank notched a third-quarter profit of $757 million, or 38 cents a share. Revenue climbed 13% from a year ago to $8.67 billion.
On average, analysts were looking for a profit of 27 cents a share on revenue of $7 billion. Morgan Stanley shares pared steeper gains at the close, but rose on the beat, jumping by 4.8%, to $34.08.
Elsewhere on the earnings front,
reported third-quarter earnings of $603 million, or 30 cents a share, exceeding the Thomson Reuters average estimate of 27 cents a share. Shares were rallied 2.7%, to $24.48.
sank 5.7% to $54.16 after the bank recorded third-quarter adjusted earnings of 72 cents a share, falling well short of the Thomson Reuters consensus estimate of 84 cents.
was among the best performers after posting earnings late Tuesday. Sallie Mae said it originated $6.9 billion in federal student loans, an increase of 25% from the year-ago quarter. Additionally, the company anticipates loan charge-offs to decline from the current quarter but to remain at historically elevated levels. Sallie Mae also said loans in late-stage delinquency decreased. Shares jumped 20.7% to $10.74.
Among analyst moves, UBS slashed its earnings estimates and stock price target for
, one day after the company released its third-quarter report, in order to reflect lower securities lending. The firm has a neutral rating on State Street's stock.
Bove took a different stance, arguing that it was "time to aggressively buy State Street" in a research note late Tuesday. He asserted that the stock has reached a "hysteria low point" and represents unusually good value. Bove narrowed his 2009 loss estimate to $3.93 a share from $4.11, although he left his 2010 and 2011 estimates unchanged.
Meanwhile, UBS also lowered earnings estimates through 2010 for
, also one day after the bank reported quarterly results. UBS noted that the company is restructuring and the core business still has room for improvement. The firm said it had a neutral rating on the stock and a new $29 price target.
In a separate research note, Bove said Bank of New York has cleared its balance sheet to allow for higher earnings. "Since the markets are expected to improve this stock may finally reverse course and move higher," he wrote. Bove also upped his earnings estimates for 2009, 2010 and 2011.
State Street sank 4.1% to $45.88, and Bank of New York gave back 2.9% to $28.06.
Elsewhere, FBR Capital Markets upgraded
to market perform from underperform and assigned a $70 stock price target, saying that the bank's earnings outlook is improving, aided by better credit trends. Shares closed down 1.6% to $66.27.
-- Written by Robert Holmes in New York
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