CHARLOTTE, North Carolina (Reuters) - Bank stocks including Bank of America Corp and Wells Fargo & Co fell on Wednesday as weak economic data pushed bond yields lower, potentially crimping industry income.
Beyond lower yields, Wednesday’s weaker-than-expected reports regarding the housing and jobs sectors signal that the U.S. economic recovery is slowing, analysts said.
“It’s going to be a tougher environment for banks,” said Jason Ware, an equity analyst with Salt Lake City-based Albion Financial, which manages $650 million in client assets.
“The question is whether this is a 3- to 6-month economic slowdown, or something more protracted.”
BofA shares declined 3.5 percent to $11.33 in afternoon trading, and Wells Fargo’s share price decreased 3.9 percent to $27.26.
The KBW Bank Index declined 3.1 percent.
Stocks broadly fell after a report from payroll processing company ADP showed that private employers added just 38,000 jobs in May, far less than expected.
Later on Wednesday, the Institute for Supply Management (ISM) said its index of national factory activity fell to 53.5 in May, its lowest level since September 2009.
Along with the stock sell off, the yield on benchmark 10-year U.S. Treasury dipped below 3 percent to its lowest level since early December.
A sustained drop in Treasury rates could further pinch bank profitability, by reducing the income banks receive on loans they make, analysts said.
Banks’ net interest margins had been stabilizing in recent quarters after declining following the height of the financial crisis.
“Everyone wants to keep betting on revenue growth, and its just not there yet,” said Marty Mosby, a bank analyst with Guggenheim Securities.
Reporting by Joe Rauch; Editing by Tim Dobbyn