After a mixed day in trading, investors appeared to regain some confidence in the broader market. Financials; however, were excluded from this, led lower by Bank of America (BAC). For the week, financials are lower by 9.2 percent, the worst performance since May of 2009.
Bank of America Corp. plummeted following the lender’s announcement that a $3 billion settlement with the ailing Fannie Mae and Freddie Mac may cost even more than anticipated alongside a rise in claims from the agencies. Additional refunds for spoiled loans issued to the two entities are reportedly being demanded “in numbers that were not expected based on historical experience,” according to the North Carolina Bank’s most recent filing.
Increased rigidity toward settling claims on the part of the government-financed enterprises could continue to threaten the banks bottom line, causing B of A to be the worst performer in its sector. $30 billion had been set aside for settlements and write downs of defective mortgages but the unanticipated, more aggressive demands from Fanny and Freddy add further complications.
Having a comparably bad day to Bank of America was Citigroup (C). The third-largest U.S. bank amended prior claims of a $22 billion in exposure to Greece, Italy, Portugal, Spain and Ireland to $31.7 billion. According to the Citi, the new number is accounted for by $2 billion in posted margin and $7 billion in hedges against funded commitments. The latter involved the purchase of credit protection from institutions outside the listed regions said the quarterly report. Beyond the latest debt challenges being faced by the bank, after hours updates revealed that thieves obtained the personal data of 92408 Citigroup credit card customers in Japan and later sold the information to a third party.
American Insurance Group (AIG) didn’t help the sector following a mixed earnings report late Thursday that indicated a quarterly profit of $1 a share against $19.57 per share losses in the year-earlier period. The goodwill was promptly undone with operating income of 69 cents; well below Wall Street expectations of 96 cents a share.
American Express (AXP) managed to be one of the few companies able to buck the trend after falling for much of the week.