Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Investors Lay Off Bank Stocks on News of Layoffs

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Headlines about big company layoffs always attract attention, and Citigroup's (NYSE: C  ) news that it'll let go around 120 employees in its residential real estate unit is no different. 120 pink slips is a small amount, however compared to the company's tens of thousands of employees in the U.S. alone. So why is Citi stock notably lagging the Dow today?

It's because of what those job cuts portend. In the wake of wafer-thin interest rates, mortgage refinancing had been a hot area of the economy for quite some time. Naturally, the car can only go so far on that low interest rate fuel; before long, rates either stabilize or rise, hitting the brakes on refi. So the gravy days of easy money from that activity are quickly drawing to a close -- to put it optimistically -- hence the layoffs.

Citi is hardly alone in rolling up the windows to keep dry from the coming rainstorm. Last month, the nation's top mortgage player Wells Fargo (NYSE: WFC  ) said it'd let go of around 2,300 people in its mortgage division. Ouch. Not surprisingly, Wells is also trudging behind the broader index, as are fellow mortgage Godzillas Bank of America (NYSE: BAC  ) and JPMorgan Chase (NYSE: JPM  ) .

In the case of JPMorgan, the problem is compounded by its own downbeat, share price-hurting news. Investors are uncomfortably digesting the bank's admission earlier this week that its bond portfolio stands to lose something in the neighborhood of $15 billion if interest rates rise by 2 percentage points. The terms "$15 billion" and "lose" are terrible when they appear in the same sentence, so it's no wonder the stock is trading down more sharply than its peers.

Amid the gloomy news of layoffs and swelling interest rates is a very sunny development in the direction of corporate finance. Verizon's (NYSE: VZ  ) record bond issue -- in which it's floating $49 billion worth of debt to help finance its buyout of Vodafone's (NASDAQ: VOD  ) stake -- is going to rain fees on the banks in the largest font size on the list of underwriters. These lucky beneficiaries are B of A's Merrill Lynch, JPMorgan Chase's J.P. Morgan, Barclays, and Morgan Stanley (NYSE: MS  ) .

According to a report in The Wall Street Journal, each stands to pocket around $41 million from their involvement in the already-well subscribed flotation. That's a fat payday for a single issue. And there's plenty of business to go around; in addition to the four mentioned entities, nine other banks crowd the underwriter list. This includes Citigroup, Wells Fargo's Securities arm, Credit Suisse, and RBS (NYSE: RBS  ) .

Still, finance sector players don't like the latest news of layoffs and the decline of the lucrative refi market they signify. Apparently, it'll take more than a monster bond issue to push them into market-beating territory.

Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2635567, ~/Articles/ArticleHandler.aspx, 9/26/2016 11:42:07 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 4:01 PM
BAC $15.09 Down -0.43 -2.77%
Bank of America CAPS Rating: ****
C $45.89 Down -1.26 -2.67%
Citigroup CAPS Rating: ***
JPM $65.78 Down -1.47 -2.19%
JPMorgan Chase CAPS Rating: ****
WFC $44.88 Down -0.86 -1.88%
Wells Fargo CAPS Rating: ****
MS $31.03 Down -0.88 -2.76%
Morgan Stanley CAPS Rating: ***