Financial exchange traded funds were hovering around the flat line on Monday as Regions Financial (NYSE: RF) and Bank of America (NYSE: BAC) led the decliners in bank stocks.
The board of Regions is probing whether its executives pushed back public disclosure of loans that were blowing up during the credit crisis, The Wall Street Journal reported. The regional bank’s shares slipped 2% at last check.
Jefferies analysts said the key questions after the report are whether the investigation is related to the late 2010 risk-management overhaul at Regions and the issues have already dealt with, and if there will be any additional steps from regulators.
“If the allegations are true, one potential follow-through is additional migration of problem loans and reserve build,” the analysts wrote in a note. “We view potential follow-through from both regulators and shareholders as key overhangs to the stocks and believe there could be a buyer strike until the issues are resolved.”
Bank of America shares were also in the red Monday after losing about 4% last week.
The largest financial ETF by assets is down about 7% this year.
Financial Select Sector SPDR Fund (NYSEArca: XLF)
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