Jeff Fawkes is a seasoned investment professional and a crypto analyst. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.
The stocks of JPMorgan and Citi are falling, showing a decrease of 17.71% and 19.27% (at opening) accordingly. The situation gave birth to fears regarding banks and coronavirus.
Citigroup Inc (NYSE: C) lost 18%, sliding to $41,98 per share. Wells Fargo & Co (NYSE: WFC) lost 14%, drowning to $26,56 per the stock. As per the Bank of America Corp (NYSE: BAC), they have lost 15%, driving the stock price to $20,44. It seems like the banks are not prepared for the coronavirus attack. More than that, since the beginning of 2020, JPMorgan Chase & Co (NYSE: JMP) lost more than 25% of its total value and shows -13,01% today. Morgan Stanley (NYSE: MS) lost the same percentage, and Citi experienced a 36% fall.
Now, the ‘dirty practice’ of stock buybacks is temporarily over. As the biggest lenders in the U.S. try to help the economy to receive a temporary boost. Wall Street push for supporting the United States via cash. They don’t plan to distribute the money among stocks and save the crashing Monday market. At one moment, the Dow lost 12%, and then went back.
The previously announced quantitative easing did not calm down the investors. Donald Trump presumed that the markets will react positively, yet the picture is the same. Jerome H. Powell adds that the banks are receiving necessary orders:
“We’d like them to use their buffers to provide loans and also to work with their borrowers. As you can see, we’re providing a lot of guidance to them across a wide range, and they’re saying they have every intention of doing that. That’s good to hear.”
Biggest American Banks Suspend Stock Buyback
Eight banks have said on Sunday that they are halting all buybacks. Those are JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs Group Inc (NYSE: GS), Morgan Stanley, Bank of New York Mellon and State Street.
All because they want to give that cash to businesses and individuals who may need it. Such a move shows that Wall Street plays a big role in destabilizing the market. Some of the experts predict that the U.S. heading towards a recession. Per the Financial Services Forum speakers:
“The COVID-19 pandemic is an unprecedented challenge for the world and the global economy and the largest U.S. banks have an unquestioned ability and commitment to supporting our customers, clients and the nation.
The decision on buybacks is consistent with our collective objective to use our significant capital and liquidity to provide maximum support to individuals, small businesses, and the broader economy through lending and other important services”
Financial Services Forum is the club of big banks, including the ones holding keys to the American economy. The members of the Forum claim that their capitals are strong, set for profits. During the last 10 years, they have increased their capital to $914 billion.
Some Banks Bought Stocks Back, Now Seek for Cash
Worth noting that Citigroup, Lehman Brothers, Bear Stearns, and Merrill Lynch bought back their stock. They also paid substantial dividends to investors in the face of crisis. In the end, such a strategy worked against them. They appeared without cash, becoming the vampires of the sinking economy. Many of the banks already failed to survive during the deposit outflow, but the government always helps major ones. Presidential candidate Bernie Sanders said that the practice of stock buyback is bad, and he would restrict it.
Per Brian Kleinhanzl from Keefee, Bruyette & Woods, when the banks won’t have the ability to repurchase stocks, they will re-allocate a huge massive of $36 billion in cash. That money can go towards fueling the economy, Brian suggests. He claims that banks could lose 3% to 10% in profits until the end of the year.