Banks Trade Sideways on Mixed Economic Data

NEW YORK (TheStreet) -- Capital One Financial (COF) and State Street (STT) of Boston were the winners among large-cap U.S. bank stocks on a lackluster Tuesday for the financial sector.

Shares of Capital One rose 0.6% to close at $70.88, while State Street was up 0.6% to close at $72.54.

The broad markets all ended higher, in contrast to KBW Bank Index (I:BKX), which was down 0.3% to 68.87, with 13 of the 24 index components showing declines, following a mixed batch of economic reports. 

The Conference Board said its Consumer Confidence index fell again in November as consumers expressed rising concern about job and earning prospects. The index had a reading of 70.4 down from 72.4 in October, after falling sharply from 80.2 in September. Economists polled by Thomson Reuters had expected the October index reading to come in at 72.9.

On a brighter note, the Department of Commerce on Tuesday reported that the number of building permits issued for privately owned homes rose to a seasonally adjusted annual rate of 1.034 million in October, which was a 6% increase from September. This was the highest rate for building permits since June 2008.

Looking at the raw figures, building permits grew to 974,000 units in September from 918,000 in August, led by multifamily building permits.

Also on Tuesday, the S&P Case-Shiller 20-City Composite Index showed a 1% in September from August, on a seasonally adjusted basis. Economists on average had expected a 0.9% increase, according to Bloomberg. The U.S. National Home Price Index was up 3.2% sequentially the third quarter and up 11.2% year-over-year, for its strongest gain since the U.S. housing market peaked during 2006.

The Federal Deposit Insurance Corp. on Tuesday reported that insured U.S. banks and thrifts during the third quarter earned a combined $36.0 billion, declining from $37.5 billion during the third quarter of 2012. This was the first year-over-year decline in earnings for the bank industry in 17 quarters, which the FDIC attributed to earnings decline to "a $4 billion increase in litigation expenses at one institution."

This was rather cagey of the regulator, which didn't mention JPMorgan Chase Bank NA by name. The main banking subsidiary of JPMorgan Chase (JPM) earned $401 million during the third quarter, declining from $4.9 billion in the second quarter and $4.0 billion during the third quarter of 2013.

On the holding company level, JPMorgan reported a third-quarter net loss of $380 million, caused by $9.15 billion in provisions for litigation expenses. Those provisions brought the company's litigation reserves to $23 billion as of Sept. 30. The company's total fourth-quarter residential mortgage-backed securities (RMBS) litigation cost has risen to $17.5 billion, including its landmark $13 billion settlement with the Department of Justice and other government authorities, and a $4.5 billion RMBS settlement with institutional investors.

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

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.

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