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As earning season rolls on, the financial sector has had its fair share of news in recent weeks, largely thanks to big settlements from the major banks still sorting out the aftermath of the financial crisis. Yet five of the biggest losers couldn't blame their travails on legal woes, but rather earnings woes -- and each has seen its stock fall around 5% or more this week.
As of writing this at 2:30pm on Friday afternoon, the biggest losers over the last week were Susquehanna Bancshares (NASDAQ: SUSQ ) , BofI Holding, (NASDAQ: BOFI ) , Regions Financial Corporation (NYSE: RF ) , Valley National Bancorp (NYSE: VLY ) , and Zillow, (NASDAQ: Z ) .
Despite announcing quarterly results that saw its earnings per share grow 20% over the prior period, Susquehanna's stock fell 5.5% on Friday thanks to a host of analyst downgrades. FBR Capital Markets, Credit Suisse, and Raymond James all downgraded the stock on Friday, which sent it lower in a sell off. The company had seen its price-to-book value rise by almost 25% before this week, though, and is up around 11% this year.
Things at Bank of Internet's parent company fell to earth over the past week, as stocks sometimes do without much news or rationale. Even though it won't release an earnings announcement before November 5th, BofI Holding watched its stock fall about 7% this week. BofI's price-to-tangible book value had risen almost 35% over the last three months, and 125% this year before the drop. While things have drifted down slightly, it still remains priced for extreme growth, with a 3.48 price-to-tangible book value.
Regions Financial Corporation
Unlike Bank of Internet, Regions Financial released earnings outlining its difficult third quarter, when it saw a dip in its net income of about 10% relative to the third quarter of 2012 and its earnings per share fell from $0.21 to $0.20. The bank attributed the fall to lower income from its difficult mortgage unit, where loan production fell by 16% relative to the second quarter. While this pattern held across almost all major banks, Regions missed analysts' expectations, and the stock saw a big sell off.
Valley National Bancorp
Like Regions, Valley National announced earnings this past week. It too saw its income fall relative to the third quarter -- except it saw a much greater dip, from $39.4 million, or $0.20 per share, to $27.1 million, or $0.14 per share. While the company noted that this was expected thanks to rising rates and lower refinancing volume, Valley's stock dropped on the announcement. Its margins also fell, as return on average equity dipped by almost 30% from 10.5% to 7.1%. Its drop in mortgage originations was the biggest contributor to the drop in income, as they fell by almost 50% relative to the second quarter.
Zillow and BofI had similar weeks, as each will announce earnings on November 5th and both fell largely without any big news. An analyst began to question Zillow's strategy and expenses, but otherwise the news was largely uneventful. The stock has been relatively volatile of late, and is down about 15% since the middle of September. Yet the good news for investors is that despite the recent dip, the stock itself is still up 188% on the year.
While making investment decisions based on market movements or quarterly earnings announcements is always a difficult game to play, it is important to stay informed. As you can see, even with diligent research, understanding why Mr. Market makes the decisions he does can be a little difficult.
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