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Coronavirus selloff disproportionately hits US banking sector

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Coronavirus selloff disproportionately hits US banking sector

U.S. banks bore the brunt of a coronavirus-led stock market correction, with much of the impact seen during the last week of February.

The S&P 500 lost 11.5% during the week ended Feb. 28 while the SNL U.S. Bank and Thrift index lost 14.9% by comparison. Markets started the first week of March with a big bounce on Monday, March 2 as both bank indexes and the broader market indexes surged by more than 4%. But stocks snapped back into sell-off mode on March 3 with banks again outpacing the broader market indexes. Analysts wrote that the market had been pricing bank stocks on the likelihood of a Federal Reserve rate cut, which came through on March 3 in the form of a 50-basis-point reduction in the benchmark rate.

Shares of Santa Clara, Calif.-based SVB Financial Group declined 20.4% during the one-week period ended Feb. 28 — the largest drop among major-exchange traded U.S. bank stocks analyzed by S&P Global Market Intelligence. Just behind were Dallas-based Triumph Bancorp Inc. and Columbus, Ga.-based Synovus Financial Corp. with one-week losses of 19.3% and 18.0%, respectively. In addition, Bank of America Corp. and Citigroup Inc. were among the list of 20 companies to see the largest declines with losses of at least 17.0%.

The analysis was limited to U.S. banks that trade on the NYSE, NYSEAM and Nasdaq, and that had an average daily volume of 20,000 shares or more over the last week of February and a market capitalization of greater than $100 million at Feb. 28.

B. Riley FBR analysts Steve Moss and Nicholas Duafala wrote in a March 3 note that a rate cut by the Federal Reserve is likely to favor banks with rate-sensitive liabilities. The analysts named Bloomington, Minn.-based Bridgewater Bancshares Inc. and Irvine, Calif.-based First Foundation Inc. as top picks due to liability-sensitive balance sheets and conservative credit culture. They also had San Diego-based Axos Financial Inc. as a top pick for its attractive valuation and unique business model.

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