Remember last fall’s Bank Transfer Day? According to Javelin Strategy and Research, the big-bank oriented protest had a statistically significant impact. For once, people were fed up enough to take action. Several months later, big banks are being shunned, again -- but by much bigger customers, and for some very different reasons.
Bank of America (NYSE: BAC ) has been slapped several times lately, most recently by the Democratic National Committee. A spokesman announced that some of the committee’s money is being moved now to labor union-owned Amalgamated Bank, with the rest to follow later in the year. Other politically-tinged groups have been changing from B of A, the historical banking choice of political movers and shakers, to Amalgamated. Does this activity indicate support for the nation’s only union-oriented bank, or dismay with Bank of America? There’s not a lot of commenting going on, so the motivation is up for grabs. There certainly seems to be a desire for left-leaning politicos to distance themselves from B of A, though.
The town of Brockton, Massachusetts, has also switched from B of A, taking its payroll elsewhere, due to escalating fees. Even clerics are getting into the act, removing church funds from the bank, to protest foreclosure practices. Other banks are losing municipal customers, too. Hempstead, New York, moved $12 million out of JP Morgan Chase (NYSE: JPM ) last year because of the way the bank treated local homeowners during foreclosure, and Buffalo withdrew $45 million this past spring, subsequent to the bank’s much-ballyhooed trading fiasco.
Fund managers have been losing interest in big banks, as well, though probably due more to performance issues than bad behavior. Hedge fund heavyweight George Soros has exited nearly all his financial positions, selling off interests in JP Morgan, Goldman Sachs (NYSE: GS ) , and Citigroup (NYSE: C ) . Louis Moore Bacon’s Moore Capital Management also sold off positions in JP Morgan, in addition to Wells Fargo (NYSE: WFC ) , and U.S. Bancorp. John Paulson has reduced his holdings of JP Morgan from almost 18.5 million shares earlier this year to just 4 million in Q2.
To be fair, some big investors have bought shares of banks in the banking sector, and Warren Buffett, once again added to his position in Wells Fargo. A London fund, Odey Asset Management, also increased its positions in Wells Fargo, as well as JP Morgan and Citi. BlueMountain Capital just recently began acquiring Citi, and added in some JP Morgan, just for good measure.
Still, the idea of some of the biggest and the best-known getting out of banking stocks is sobering. Many of the largest banks now trade at substantial discounts to their own book value, reflecting just how hesitant many investors are to owning shares.
Do investors need to worry about the exodus from everything big bank? It’s been almost a year since Bank Transfer Day, and a lot has happened -- including the London whale, the LIBOR scandal, and the filing of scores of lawsuits against big banks for underhanded deals they’ve made since 2006.
At the very least, it seems to me to be cause for heightened attention.
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