JPMorgan: Sell-off in large banking shares 'overdone'
By Scott Kanowsky
Investing.com -- A recent sell-off in large banking shares was "overdone," according to analysts at JPMorgan, mostly due to the stronger cash positions these lenders have compared to their smaller peers.
Banking stocks lost over $80 billion in value on Thursday after startups-focused SVB Financial Group (NASDAQ: SIVB ) announced that it had embarked on a $1.75B share sale in a bid to shore up its finances. In addition, the struggling firm said it entered into a subscription agreement with equity investor General Atlantic to purchase $500 million in a separate private transaction.
On Friday, SVB shares were down 44% in pre-market trading, adding on to a 60% drop in the prior session. Meanwhile, bigger U.S. rivals JPMorgan (NYSE: JPM ), Citigroup (NYSE: C ) and Morgan Stanley (NYSE: MS ) were also slightly in the red, easing back from steeper drops on Thursday.
But in a note to clients, the JPMorgan analysts argued that "managements of many banks" under its coverage were calm and did not indicate any concern in meetings during yesterday's slide in these stocks.
"We believe the sell-off was overdone as large banks have a lot more liquidity than smaller banks, they are more diversified with broader business models, have a lot of capital, are much better managed in regards to risk, and have a lot of oversight from regulators," the analysts said.
As a result, they added that they don't expect to see a "fire sale" of securities from these bigger lenders.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.
Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb
Drop an image here or