Bank Stocks Crumble: Is This the Warning Sign of a Global Recession?
TLDR
Bank stocks plunged globally with major U.S. banks down 4-7% in premarket trading
Morgan Stanley analyst Betsy Graseck downgraded Goldman Sachs to Hold and Comerica to Sell
Bank of America was upgraded to Buy despite a lowered price target
Global banking indices showed steep losses: Topix Banks Index down 10%, Stoxx 600 Banks Index down 5%
Major U.S. banks will report Q1 earnings starting Friday, April 11
Bank stocks across the world tumbled on Monday as fears of a global recession grew stronger. The selloff came amid uncertainty over President Donald Trump’s sweeping tariffs and their potential economic impact.
In U.S. premarket trading, major banks were hit hard. Morgan Stanley fell more than 7%, while Goldman Sachs dropped 6.7%. Wells Fargo declined 6%, Citigroup was down 5.8%, and JPMorgan Chase tumbled 4.1%.
Regional banks faced even steeper declines. F.N.B. Corp plunged 56% ahead of market open, and First Hawaiian dropped 27%. The S&P 500 Banks Index has already fallen more than 15% over the last two trading days.
Japanese banks also saw heavy losses. The Topix Banks Index was down 17% at one point before recovering to a 10% decline. Japan Post Bank shares plummeted 10% as tariff concerns reduced hopes for rate hikes.
European banks weren’t spared either. The Stoxx 600 Banks Index fell around 5% shortly after markets opened, extending its April losses to 19%. Spain’s Banco Santander dropped 14.5%, Germany’s Commerzbank fell 10%, and the UK’s Barclays declined 9%.
Analyst Reshuffles Bank Ratings
Against this backdrop, Morgan Stanley analyst Betsy Graseck made several key changes to bank ratings. She downgraded Goldman Sachs from Buy to Hold and cut its price target to $558 from $659.
The downgrade reflects Goldman’s vulnerability to recession risks due to its heavy reliance on investment banking. This sector tends to react quickly to worsening market conditions.
Graseck also downgraded Comerica stock from Hold to Sell. She reduced its price target to $55 from $63, citing concerns that faster and higher tariffs increase recession risks.
These risks could slow loan growth and reduce future earnings and valuations for Comerica. While midcap banks are trading at low prices, slow loan growth and an inverted yield curve limit chances for improvement.
Bank of America Upgraded Despite Market Turbulence
In a surprising move, Graseck upgraded Bank of America to Buy from Hold. However, she still lowered its price target to $47 from $56.
The upgrade came mainly due to Bank of America’s low stock price. The bank has performed poorly compared to other major banks this year, creating a potential value opportunity.
Morgan Stanley projects that Bank of America’s net interest margin might grow steadily from 1.96% in 2024 to 2.08% in 2025. It could reach 2.15% by 2026.
This growth is linked to an expected $1.6 billion boost in net interest income. The increase should come as the Bloomberg Short-Term Bank Yield Index is phased out between late 2024 and late 2026.
According to the TipRanks Stock Comparison tool, Bank of America stock has a Strong Buy consensus rating. Goldman Sachs has a Moderate Buy rating, while Comerica stock holds a Hold rating.
Analysts see more than 30% growth potential in all three stocks, despite current market volatility. The banking sector faces a pivotal week ahead as major U.S. banks prepare to report first-quarter earnings.
JPMorgan Chase, Morgan Stanley, and Wells Fargo will report earnings on Friday, April 11. Goldman Sachs and Bank of America will follow with reports on April 14 and April 15, respectively.
Comerica is scheduled to release its quarterly numbers on April 18. These reports will provide crucial insights into how banks are handling the current economic challenges.
Hargreaves Lansdown analyst Susannah Streeter noted that “Banks are seen as barometers for economic health, and given the steep losses, red lights are flashing about a looming global recession.”
Despite the gloomy outlook, some analysts remain optimistic about certain banking stocks. Keefe, Bruyette & Woods analysts pointed out that last week’s selloff in U.K. bank shares wasn’t as severe as the drop following the 2016 Brexit referendum.
They added, “We remain positive on U.K. domestic banks, where the recent selloff and current valuations suggest a dire outcome in a remarkably benign banking environment.”
The post Bank Stocks Crumble: Is This the Warning Sign of a Global Recession? appeared first on CoinCentral.
Filed under: News - @ April 7, 2025 12:30 pm