Trump to Meet Bank Executives Amid Market Turmoil

“You could see these bank stocks come under more pressure,” said Nathan Stovall, principal analyst at S&P Global Market Intelligence, in an interview Tuesday, though already “there is a pretty negative scenario priced in here.”

Many banks also have heavy exposure to the oil industry. After Saudi Arabia cut the price of oil this week, stocks of companies in the oil patch plummeted. Many investors expect that these companies, which typically borrow heavily to fund their operations, will struggle to sell their oil and pay off their loans. Banks including Bank of America and Wells Fargo have billions of dollars of loans in the energy industry. While these giant banks’ oil exposure is only a part of their vast lending portfolios, smaller banks have a greater share of their business tied up in energy loans.

But all the volatility has an upside for banks as well: At firms like Goldman, Citigroup, Bank of America and JPMorgan, the high volume of trading in recent weeks has created revenue opportunities as traders and salespeople work with clients to continually rebalance their portfolios of global stocks, bonds and currencies.

“Volumes across the board in kind of every asset that I deal with have been quite large over the past two weeks,” said Jen Roth, who runs Goldman’s currencies and emerging-markets business in the United States, in an interview last week.

On Tuesday, many of the bank executives planning to attend the White House meeting were still preparing what to say, said the bank officials briefed on the plans.

But one thing is clear: Even as banks take precautions to limit the spread of coronavirus among their employees and face potential losses, these financial institutions are, arguably, in much better health and better prepared for the turbulence than they were during the 2008 financial crisis, which led to multiple bank failures and distressed asset sales. New financial regulations put in place in the aftermath of that recession pared risk-taking and increased transparency into bank planning and operations, making them stronger entities.

“Capital is substantially higher and substantially better quality than it was 12 or 13 years ago,” said Daniel Tarullo, who was the Fed’s key architect of post-crisis bank oversight. But, Mr. Tarullo, who is now at Harvard University, said: “That’s not to say that there’s certainly enough capital for this particular kind of risk.”

Source Article