A JPMorgan Securities Inc. analyst said Wednesday that credit weakness continues to plague major banks as problems spread to new markets and categories.
In a client note Wednesday, analyst Vivek Juneja said that Bank of America cited new mortgage weakness in Virginia and the greater Washington, D.C., area; Fifth Third Bancorp pointed to Illinois; and Wells Fargo & Co. found higher losses in Minnesota.
In the first quarter, Illinois had the second highest quarter-over-quarter increase in home loans written off as not being repaid, Fifth Bancorp said. Florida led that category, the bank said.
Additionally, loan categories such as credit cards, small business, auto and other consumer loans like RV and marine, are also showing softness.
In a separate note, Juneja said US Bancorp highlighted slower consumer spending, with more transactions shifting to credit cards from debit cards because of lower checking account balances. This, in turn, increases credit losses.
Juneja expects volatility in the sector's stock prices to continue this year "as investors look for entry points into bank stocks but fundamentals continue to pressure the sector.'
"Wells Fargo and US Bancorp have held up the best, but they too are not immune to the credit cycle," the analyst wrote.
Shares of Wells Fargo added 6 cents to $29.03 in early afternoon trading, while US Bancorp's stock rose 39 cents to $34.38. Bank of America to 18 cents to $36.79 and Fifth Third rose 25 cents to $20.98.
The broader markets rose after a better-than-expected report on consumer prices tempered some of Wall Street's concerns about inflation. The Dow Jones industrial average rose more than 100 points.
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