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The KBW Regional Banking Index fell 3% to its lowest since June 23, adding to its year-to-date loss of 25.9%. The S&P 500 Banks Index slipped nearly 2.8%.
“Net interest margin pressure is likely to be greater than most expect as the ‘honeymoon’ period of the tightening cycle, in which assets reprice higher while liabilities repricing lags, has come to an end,” said analysts at brokerage Raymond James.
The banking sector’s biggest crisis since 2008 has shaken investor trust as small lenders found themselves on the wrong side of the U.S. Federal Reserve’s rate-hike cycle.
“The bright spots are few and far between from a fundamental perspective for most banks in the current interest-rate environment,” Raymond James analysts said.
Regional lender PacWest Bancorp dropped 8.1% after KBW analysts cut the price target on the stock to $9 from $14. Comerica (NYSE:CMA), KeyCorp (NYSE:KEY), U.S. Bancorp also fell between 3.5% and 5.1%.
Bank stocks over the last month had regained some ground after bearing the brunt of investor anxieties since March when the collapse of three mid-sized lenders sparked a sector-wide selloff.
Last week, shares rose after the Federal Reserve’s annual health checks showed lenders could weather an economic slump.
Among individual movers, big banks JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Goldman Sachs Group (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), and Bank of America (NYSE:BAC) dropped between 1.7% and 3.2%.
Banks are due to kick-off the second-quarter reporting season late next week, with analysts and investors anxiously looking for updates on deposit stability, net interest margin expansion and executive comments on a looming economic slowdown.
