BOK Financial in Tulsa, Oklahoma, said it is absorbing steep trading losses amid Russia’s invasion of Ukraine.
The impact of the war is compounding issues from
Most of these losses are unrealized and may fluctuate in either direction during the remainder of the first quarter, the company said.
“We believe this charge materially represents fair value adjustment at present,” but circumstances “are choppy and this could change as market conditions evolve,” Stacy Kymes, BOK’s president and CEO, said in the filing. “While this business has created earnings volatility currently, the historic and long-term prospects of our trading platform has been good, and we remain committed to this business.”
The company did not immediately respond to requests for additional comment.
MBS investor pullback comes amid market expectations for the Fed to boost interest rates as soon as this month. The Fed has signaled its intention to raise its benchmark rate to curb inflation that hit a 40-year high in February.
The U.S. Labor Department said Thursday that its consumer price index, which measures inflation across the economy, reached a
Analysts said the war has exacerbated surging energy prices, given that Western sanctions against the energy-rich Russia threaten to choke off its exports of oil and gas. Russia is the world’s third-largest oil producer.
U.S. President Biden this week banned imports of Russian oil. Global oil costs hit a 14-year high and gasoline prices this week reached record levels in the wake of that decision Tuesday, according to AAA.
Prices “are soaring because the ban makes it more of a challenge to trade in Russian oil and more likely that other countries may follow suit,” said Bjornar Tonhaugen, analyst for Rystad Energy. The longer the war lasts, the more likely further embargoes against Russian oil become — and energy prices could drive inflation to all-time highs, he said.
Even before the Fed’s anticipated short-term rate hikes, market-driven long-term rates have climbed this year, making mortgages more expensive. Freddie Mac said Thursday that the 30-year fixed-rate mortgage averaged 3.85% last week, up from 3.76% the prior week and up from 3.05% a year earlier.
“We expect rates to continue to rise as inflation broadens,” Sam Khater, Freddie Mac’s chief economist, said in a report.
Analysts said that BOK’s challenges foreshadow potential securities losses at other banks for the first quarter as well.
“At this time, we are not adjusting our estimates given the rapidly evolving situation and continued volatility of the market in both directions,” said Jon Arfstrom, analyst for RBC Capital Markets, in a note to clients about BOK. However, “we will continue to monitor current events closely given the potential long-term consequences for both BOK and the industry at large.”
Should BOK realize a $50 million securities loss at quarter-end, Arfstrom estimated a negative impact of 58 cents to first-quarter earnings per share. BOK reported earnings of $1.71 per share for the fourth quarter of 2021.
